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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM _________ TO _________
COMMISSION FILE NUMBER 1-12588
ALEXANDER HAAGEN PROPERTIES, INC.
(Exact name of registrant as specified in charter)
MARYLAND 95-4444963
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
3500 SEPULVEDA BOULEVARD
MANHATTAN BEACH, CALIFORNIA 90266
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (310) 546-4520
Securities registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
------------------- -----------------------------------------
COMMON STOCK, PAR VALUE $.01 PER SHARE AMERICAN STOCK EXCHANGE
7 1/2% CONVERTIBLE SUBORDINATED
DEBENTURES DUE 2001, SERIES A AMERICAN STOCK EXCHANGE
Securities registered pursuant to Section 12(g) of the Act:
NONE REGISTERED
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for at least the past 90 days. YES [X] NO [_].
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K: [X]
The aggregate market value of the voting stock held by non-affiliates of
the Registrant was approximately $170,751,000 (computed on the basis of $14.875
per share), which was the last sale price on the American Stock Exchange on
March 12, 1997.
As of March 12, 1997, 12,024,378 shares of Common Stock, Par Value $.01 Per
Share, were outstanding.
LIST OF DOCUMENTS INCORPORATED BY REFERENCE
Part III of this Form 10-K incorporates by reference information from the
Registrant's definitive proxy statement to be filed with the Securities and
Exchange Commission within 120 days of the close of Registrant's fiscal year.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM PAGE
- ---- ----
PART I
<C> <S> <C>
1. BUSINESS............................................................ 1
2. PROPERTIES.......................................................... 2
3. LEGAL PROCEEDINGS................................................... 12
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS................. 13
PART II
5. MARKET FOR REGISTRANT'S COMMON STOCK AND
RELATED STOCKHOLDER MATTERS......................................... 13
6. SELECTED FINANCIAL DATA............................................. 13
7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS....................... 15
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA......................... 21
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE.............................. 41
PART III
10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT................. 41
11. EXECUTIVE COMPENSATION............................................. 41
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT..... 41
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..................... 41
PART IV
14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K... 41
SIGNATURES.................................................................. S-1
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i
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PART I
ITEM 1. BUSINESS
Alexander Haagen Properties, Inc., a Maryland corporation (the "Company"),
was organized in September 1993 as a self-administered and self-managed real
estate investment trust. The Company was formed to continue and expand the
business of The Alexander Haagen Company, Inc. and certain of its affiliates
(the "Predecessor Affiliates") and presently engages in the ownership,
management, leasing, acquisition, development and redevelopment of retail
shopping centers in California and other western states.
As of December 31, 1996, the Company owned a portfolio comprised of
interests in 38 retail shopping centers (the "Properties"). See "Item 2 --
Properties." All of the Properties and assets in the Company's portfolio are
held and operated by Alexander Haagen Properties Operating Partnership, L.P., a
California limited partnership (the "Operating Partnership"). The Company is
the sole general partner of the Operating Partnership and owns a 74% interest
therein. The Company conducts substantially all of its operations through the
Operating Partnership and generally has full, exclusive and complete
responsibility and discretion in the management and control of the Operating
Partnership.
On December 27, 1993, the Company consummated its initial public offering
of 10,800,000 shares of Common Stock at $18.00 per share. Concurrently with
such offering, the Company issued $150,000,000 aggregate principal amount of 7
1/2% Convertible Subordinated Debentures due 2001 Series A and (the "Convertible
Debentures"), and the Operating Partnership issued $30,000,000 aggregate
principal amount of 7 1/4% Subordinated Exchangeable Debentures due 2003 (the
"Exchangeable Debentures, and together with the Convertible Debentures, the
"Debentures"). In addition, on December 27, 1993 the Company consummated a
private placement of 500,000 shares of Common Stock with partners of the
Predecessor Affiliates in consideration of transfers of Properties and certain
partnership interests to the Company. The initial public offering of Common
Stock and the offerings of Debentures are sometimes collectively referred to
herein as the "Offerings."
Leasing and other property management functions are conducted at all of the
Properties by Haagen Property Management, Inc., a California corporation
("HPMI"), pursuant to management agreements between the Operating Partnership
and HPMI. HPMI employs a staff of 87 full-time real estate professionals with
extensive experience, knowledge of local markets and an established track record
with national, regional and local retailers. The Company believes that the
expertise and relationships developed by its professionals enhance the Company's
ability to attract and retain high quality tenants. The Company owns all of the
outstanding non-voting preferred stock of HPMI, which represents a 95% economic
interest in HPMI. All of the outstanding voting common stock of HPMI,
representing a 5% economic interest in HPMI, is held by certain executive
officers of the Company.
The Company operates so as to qualify as a real estate investment trust
("REIT") under Sections 856-860 of the Internal Revenue Code. Under those
sections of the Internal Revenue Code, the Company must distribute annually to
its stockholders at least 95% of its taxable income and must meet certain other
asset and income tests. Dividends to stockholders from a qualified REIT are
deductible by such REIT in calculating its income tax liability. As a result,
pre-tax income of the Company flows through to its stockholders who are taxed on
the income on their individual income tax returns, thus eliminating the "double
taxation" inherent in regular corporations. REITs are subject to a number of
organizational and operational requirements. If the Company fails to qualify as
a REIT in any taxable year, the Company will be subject to federal income tax
(including any applicable alternative minimum tax) on its taxable income at
regular corporate rates. Even if the Company qualifies for taxation as a REIT,
the Company may be subject to certain federal, state and local taxes on its
income and property.
The Company competes with commercial developers, real estate companies,
pension funds and other real estate investors, many of which have greater
financial resources than the Company, in seeking land for development,
properties for acquisition and tenants for leasing of properties. There are
numerous shopping centers that compete with the Properties in attracting
retailers to lease space. In addition, retailers at the Properties face
increasing competition from outlet malls, discount shopping clubs, direct mail
and telemarketing.
1
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ITEM 2. PROPERTIES
The Properties consist of 14 neighborhood/community shopping centers, 8
promotional/power centers, 2 regional malls and 14 single tenant facilities,
containing in the aggregate approximately 8.0 million square feet of total gross
leasable area ("GLA"). Approximately 6.6 million square feet of GLA is owned by
the Company, and the balance is owned by certain anchor retailers. The Company
believes that management's attention to quality, design and aesthetics, tenant
mix and other specific community needs position a number of the Properties among
the premier retail shopping centers in their respective communities. The
majority of the Properties are located throughout Southern California, including
14 in Los Angeles County, 5 in San Diego County, 3 in Orange County, 2 in San
Bernardino County, 2 in Riverside County, 1 in Imperial County and 1 in Ventura
County. Based on published industry sources, the Company believes that the
geographic concentration of the Properties establishes it as one of the leading
fully integrated owners, managers and developers of retail shopping centers in
Southern California. Five Properties are located in Northern and Central
California, 3 Properties are located in Arizona and 2 Properties are located in
Oregon.
The Company's single tenant facilities range in size from approximately
36,800 square feet of total GLA to approximately 135,000 square feet of total
GLA. The Company's neighborhood/community shopping centers and
promotional/power centers range in size from approximately 66,000 square feet of
total GLA to approximately 577,000 square feet of total GLA. The Company's
regional malls range in size from approximately 810,000 square feet of GLA to
approximately 1,215,000 square feet of GLA).
The Properties are designed to attract local and regional area customers
and are typically anchored by one or more nationally or regionally known
retailers. Depending on the market focus of a specific Property, major
retailers at a Property may include value-oriented discount stores,
supermarkets, membership warehouses, traditional department stores, fashion-
oriented department stores, shops or well-known specialty retailers. Several of
the Properties contain an entertainment component such as a theater multiplex.
Anchor leases are typically for initial terms of 10 to 35 years, with one or
more renewal options available to the lessee upon expiration of the initial
term. By contrast, smaller shop leases are typically for 5 to 10 year terms.
The longer term of the anchor leases helps to protect the Company against
significant vacancies and to insure the presence of anchor retailers who draw
consumers to the Company's retail centers. The shorter term of the smaller shop
leases allows the Company to adjust rental rates for non-anchor store space on a
regular basis and upgrade the overall tenant mix. Anchor leases are generally
for lower base rents than leases for smaller shop tenants. The lower base rents
paid by anchor retailers may be offset, in part, through periodic escalations
and/or the payment of percentage rents. Certain anchor retailers at some of the
Properties occupy space not owned by the Company and therefore do not pay base
rent to the Company.
As part of its acquisition program, the Company regularly evaluates
potential acquisition properties. During 1994, the Company acquired the
following four Properties (the "1994 Acquisition Properties"); Rosedale Village
(California), Gresham Town Fair (Oregon), Medford Center (Oregon) and La Verne
Towne Center (California), for aggregate consideration of approximately $50.8
million, including the assumption of $10.65 million of indebtedness and the
issuance of OP Units valued at $1.7 million. In addition, in December 1994, the
Company purchased the fee interest in the Advantage/Sportmart Shopping Center
(San Diego, CA) for consideration of $4.1 million in cash. No properties were
acquired during 1996 or 1995.
During 1996, the Company sold 2 of its single tenant facilities for
aggregate net proceeds of $6.3 million. In June 1996, the Company sold the Vons
market located in Ventura, California for $2.8 million. In October 1996, the
Company sold its property in Rancho Cucamonga for $3.5 million. The property
was leased to Dayton-Hudson and had been vacant for several years. The proceeds
from the sales were used to reduce borrowings on the Company's credit facility
and to retire mortgage indebtedness secured by one of the properties.
Twenty-nine of the Properties are owned by the Company in fee and 9 are
held by the Company under long-term ground leases. Included in the long-term
ground leases are the Partially-Owned Properties, in which the Company owns,
directly or indirectly, partnership interests (75% in Kenneth Hahn Plaza and 34%
in Vermont-Slauson Shopping Center).
2
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DESCRIPTION OF PROPERTIES
The following table summarizes certain information with respect to the
Properties as of December 31, 1996.
<TABLE>
<CAPTION>
YEAR OF TOTAL GLA TO
CONSTRUCTION SHOPPING COMPANY BE GLA
(OR MOST OWNERSHIP LAND CENTER OWNED BUILT AVAILABLE
RECENT INTEREST AREA GLA GLA (SQ. FOR LEASE ANCHOR OR
PROPERTY NAME RENOVATION) (EXPIRATION)(1) (ACRES) (SQ. FT.) (SQ. FT.) FT.) (SQ. FT.) PRINCIPAL TENANTS
------------- ------------ ----------- ------ --------- --------- ------- --------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STABILIZED PROPERTIES
REGIONAL MALLS
Baldwin Hills Crenshaw Plaza. 1988 Fee 42.0 809,980 349,980 - 349,980 Sears/2/, Robinson's-
(Los Angeles, CA) May/2/, Macy's/2/,
Lucky, TJ Maxx,
Sony/Magic Johnson
Theatres
Media City Center............ 1992 Ground Lease 37.1 1,211,439 781,829 - 781,829 Macy's, IKEA/2/,
(Burbank, CA) (2078) ---- --------- --------- ------ ------- Sears/2/,
Mervyn's/2/, AMC
Theatres, Sport
Chalet, CompUSA,
Barnes & Noble,
Virgin Megastore
SUBTOTAL REGIONAL MALLS..... 79.1 2,021,419 1,131,809 - 1,131,809
----- --------- --------- ------- ---------
PROMOTIONAL/POWER CENTERS
El Camino North.............. 1982 Fee 54.0 450,894 324,394 - 324,394 Mervyn's/2/, Toys 'R'
(Oceanside, CA) Us/2/, Montgomery
Ward, Mann Theatres,
Ross Stores
Empire Center................ 1993 Fee 60.5 626,607 262,107 6,300 268,407 Target/2/,
(Fontana, CA) Mervyn's/2/,
IKEA/2/, Miller's
Outpost, Ross Stores
Fullerton Town Center........ 1987 Fee 21.7 359,397 246,697 30,750 277,447 Price Club/2/
(Fullerton, CA) AMC Theatres, Toys
'R' Us, Office Depot
Gresham Town Fair............ 1988 Fee 25.6 264,638 264,638 - 264,638 Ross Stores,
(Gresham, OR) Emporium, GI Joes,
Craft Warehouse
Montebello Town Square....... 1992 Fee 24.5 250,438 250,438 - 250,438 Sears, Toys 'R' Us,
(Montebello, CA) AMC Theatres, Pet
Metro
The City Center.............. (1992) Fee 6.8 194,193 194,193 - 194,193 Toys 'R' Us,
(San Francisco, CA) ----- --------- --------- ------- ------- Mervyn's, Office
Depot, Good Guys
SUBTOTAL
PROMOTIONAL/POWER
CENTERS.................... 193.1 2,146,167 1,542,467 37,050 1,579,517
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
Advantage/Sportmart Shopping
Center...................... (1988) Fee 10.3 117,460 117,460 - 117,460 Advantage (Lucky),
(San Diego, CA) SportMart
Country Fair Shopping Center. 1992 Fee 17.3 211,761 168,321 - 168,321 Albertson's/2/,
(Chino, CA) PETsMART, Thrifty,
Staples, T.J. Maxx
Date Palm Center............. 1987 Fee 11.0 117,362 117,362 4,000 121,362 SAM's Club
(Cathedral City, CA)
Fire Mountain Center......... 1987 Fee/Ground 9.4 83,871 83,871 8,507 92,378 Strouds, Lamps
(Oceanside, CA) Lease Plus, Trader
(2038) Joe's, Bookstar
Gardena Gateway Center....... 1990 Fee 9.7 65,987 65,987 - 65,987 Thrifty, 99 Ranch
(Gardena, CA) Market
Huntington Center............ (1989) Ground 3.9 110,244 110,244 - 110,244 Toys 'R' Us, Lucky
(Huntington Beach, CA) Lease
(2032)
Kenneth Hahn Plaza........... 1987 Ground 14.5 162,665 162,665 6,500 169,165 Boys Market,
(Los Angeles, CA) Lease Pic'N'Save,
(2052) Thrifty, Super Trak
Auto
La Verne Towne Center........ 1986 Fee 19.1 231,143 231,143 - 231,143 Target, Albertson's
(La Verne, CA)
Lakewood Plaza............... (1989) Ground 11.1 113,511 113,511 - 113,511 Lucky, Staples
(Bellflower, CA) Lease
(2032)
Parkway Place................ (1989) Ground 9.7 120,603 120,603 - 120,603 Advantage (Lucky),
(Escondido, CA) Lease Office Depot
(2037)
Pomona Gateway Center........ (1993) Fee 9.8 108,887 108,887 - 108,887 Vons, Pic'N'Save
(Pomona, CA)
Rosedale Village............. 1991 Fee 10.6 217,006 127,527 - 127,527 Savemart, Payless
(Bakersfield, CA) Drugs, Kmart/2/
San Fernando Mission Plaza... 1991 Fee 4.9 67,192 67,192 - 67,192 Vons (Value Plus)
(San Fernando, CA)
</TABLE>
3
<PAGE>
<TABLE>
YEAR OF TOTAL GLA TO
CONSTRUCTION SHOPPING COMPANY BE GLA
(OR MOST OWNERSHIP LAND CENTER OWNED BUILT AVAILABLE
RECENT INTEREST AREA GLA GLA (SQ. FOR LEASE ANCHOR OR
PROPERTY NAME RENOVATION) (EXPIRATION)(1) (ACRES) (SQ. FT.) (SQ. FT.) FT.) (SQ. FT.) PRINCIPAL TENANTS
------------- ------------ ----------- ------ --------- --------- ------- --------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STABILIZED PROPERTIES
Vermont-Slauson Shopping 1981 Ground 10.3 169,744 169,744 - 169,744 Boys Market,
Center...................... Lease ----- --------- --------- ------- ------- Kmart,
(Los Angeles, CA) (2070) Sav-On Drugs
SUBTOTAL
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS........... 151.6 1,897,436 1,764,517 19,007 1,783,524
----- --------- --------- ------- ---------
SINGLE TENANT FACILITIES
Home Base.................... (1988) Fee 8.7 107,165 107,165 - 107,165 Home Base
(Glendora, CA)
Kmart........................ 1990 Fee 8.8 86,479 86,479 - 86,479 Kmart
(Banning, CA)
Kmart........................ 1990 Fee 9.1 86,479 86,479 - 86,479 Kmart
(El Centro, CA)
Kmart........................ 1990 Fee 6.8 86,479 86,479 - 86,479 Kmart
(Los Banos, CA)
Kmart........................ 1990 Fee 6.2 86,479 86,479 - 86,479 Kmart
(Madera, CA)
Kmart........................ 1990 Fee 8.7 104,204 104,204 - 104,204 Kmart
(Phoenix, AZ)
Kmart........................ 1990 Fee 8.3 86,479 86,479 - 86,479 Kmart
(Rocklin, CA)
Oracle Road.................. (1989) Fee 8.1 102,400 102,400 - 102,400 Montgomery Ward
(Tucson, AZ)
SAM's Club................... (1988) Ground 9.8 114,722 114,722 - 114,722 SAM's Club
(Downey, CA) Lease
(2009)
SAM's Club................... (1988) Fee 11.5 119,126 119,126 - 119,126 SAM's Club
(Fountain Valley, CA)
Sears........................ (1992) Fee 4.3 134,644 134,644 - 134,644 Sears
(Hollywood, CA)
Smitty's..................... (1992) Fee 8.5 106,265 106,265 - 106,265 Smitty's
(Tucson, AZ)
Vons......................... (1989) Fee 3.5 36,800 36,800 - 36,800 Vons
(Escondido, CA)
Vons......................... (1993) Ground 9.8 105,000 105,000 - 105,000 Vons
(Simi Valley, CA) Lease ----- --------- --------- ------- --------
(2023)
SUBTOTAL SINGLE TENANT 112.1 1,362,721 1,362,721 - 1,362,721
FACILITIES................. ----- --------- --------- ------- ---------
SUBTOTAL STABILIZED
PROPERTIES................. 535.9 7,427,743 5,801,514 56,057 5,857,571
----- --------- --------- ------- ---------
REDEVELOPMENT PROPERTIES
PROMOTIONAL/POWER CENTERS
Covina Town Square........... (1993) Fee 35.5 264,367 256,367 115,283 371,650 Home Depot,
(Covina, CA) Staples, PETsMART
Medford Center............... (1984) Fee 30.1 265,139 180,393 160,283 340,676 Sears, Emporium,
(Medford, OR) ----- --------- --------- ------- -------- Payless/2/,
Safeway/2/
SUBTOTAL REDEVELOPMENT
PROPERTIES................. 65.6 529,506 436,760 275,566 712,326
----- --------- --------- ------- --------
TOTAL ALL PROPERTIES...... 601.5 7,957,249 6,238,274 331,623 6,569,897
===== ========= ========= ======= =========
- ------------------------
</TABLE>
(1) The date indicated is the expiration date of any ground lease after giving
effect to all renewal periods.
(2) Anchor space not owned by the Company.
4
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PROPERTY PERFORMANCE SUMMARY
The following table sets forth, on a property-by-property basis, the GLA
leased to anchor tenants, pad tenants and shop tenants, as of December 31, 1996:
<TABLE>
<CAPTION>
GLA TO AVERAGE
ANCHOR PAD SHOP AVAILABLE BE BUILT TOTAL ANNUALIZED BASE ANNUAL
GLA(1) GLA(2) GLA(3) GLA (SQ. GLA PERCENT BASE RENT PERCENTAGE
PROPERTY NAME (SQ. FT.) (SQ. FT.) (SQ. FT.) (SQ. FT.) FT.) (SQ. FT.) LEASED(4) RENT(5) PSF (6) RENT(7)
------------- ---------- --------- --------- ---------- -------- --------- --------- ----------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STABILIZED PROPERTIES
REGIONAL MALLS
Baldwin Hills Crenshaw Plaza. 131,930 40,270 157,670 20,110 - 349,980 94.3 $ 6,212,998 $18.83 $ 68,557
Media City Center............ 451,616 30,654 235,016 64,543 - 781,829 91.7 11,419,194 15.92 152,716
--------- ------- --------- ------- ------- --------- ----------- --------
583,546 70,924 392,686 84,653 - 1,131,809 92.5 17,632,192 16.84 221,273
--------- ------- --------- ------- ------- --------- ----------- --------
PROMOTIONAL/POWER CENTERS
El Camino North.............. 114,840 127,611 72,562 9,381 - 324,394 97.1 3,682,098 11.69 9,792
Empire Center................ 109,977 37,999 88,736 25,395 6,300 268,407 90.3 2,626,388 11.10 -
Fullerton Town Center........ 130,963 19,462 70,880 25,392 30,750 277,447 89.7 3,719,947 14.76 -
Gresham Town Fair............ 159,282 26,576 72,540 6,240 - 264,638 97.6 2,078,224 8.04 4,184
Montebello Town Square....... 210,533 7,879 27,064 4,962 - 250,438 98.0 2,575,035 10.49 -
The City Center.............. 177,584 - 16,609 - - 194,193 100.0 2,652,189 13.66 17,883
--------- ------- --------- ------- ------- --------- ----------- --------
903,179 219,527 348,391 71,370 37,050 1,579,517 95.4 17,333,882 11.54 31,859
--------- ------- --------- ------- ------- --------- ----------- --------
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
Advantage/Sportmart Shopping
Center...................... 105,210 12,250 - - - 117,460 100.0 1,301,265 11.08 20,643
Country Fair Shopping Center. 85,725 44,295 26,311 11,990 - 168,321 92.9 1,979,540 12.66 16,237
Date Palm Center............. 99,919 - 14,129 3,314 4,000 121,362 97.2 1,493,495 13.10 -
Fire Mountain Center......... 44,481 23,432 15,958 - 8,507 92,378 100.0 1,743,916 18.88 68,400
Gardena Gateway Center....... 41,300 5,062 19,625 - - 65,987 100.0 984,206 14.92 3,909
Huntington Center............ 105,879 - - 4,365 - 110,244 96.0 1,168,979 11.04 -
Kenneth Hahn Plaza........... 97,186 11,798 33,825 19,856 6,500 169,165 87.8 1,387,341 9.71 -
La Verne Towne Center........ 158,860 1,940 49,635 20,708 - 231,143 91.0 1,266,381 6.02 -
Lakewood Plaza............... 93,342 4,365 15,804 - - 113,511 100.0 1,257,858 11.08 -
Parkway Place................ 91,127 12,917 10,732 5,827 - 120,603 95.2 1,188,397 10.35 10,309
Pomona Gateway Center........ 96,418 9,977 2,492 - - 108,887 100.0 957,794 8.80 -
Rosedale Village............. 72,324 - 48,545 6,658 - 127,527 94.8 1,292,448 10.69 -
San Fernando Mission Plaza... 50,508 2,293 14,391 - - 67,192 100.0 888,879 13.23 -
Vermont-Slauson Shopping
Center...................... 142,411 3,720 23,613 - - 169,744 100.0 980,848 5.78 -
--------- ------- --------- ------- ------- --------- ----------- --------
1,284,690 132,049 275,060 72,718 19,007 1,783,524 95.9 17,891,347 10.52 119,498
--------- ------- --------- ------- ------- --------- ----------- --------
SINGLE TENANT FACILITIES
Home Base.................... 107,165 - - - - 107,165 100.0 870,180 8.12 -
Kmart (Banning, CA).......... 86,479 - - - - 86,479 100.0 457,744 5.29 -
Kmart (El Centro, CA)........ 86,479 - - - - 86,479 100.0 507,915 5.87 -
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
GLA TO AVERAGE
ANCHOR PAD SHOP AVAILABLE BE BUILT TOTAL ANNUALIZED BASE ANNUAL
GLA(1) GLA(2) GLA(3) GLA (SQ. GLA PERCENT BASE RENT PERCENTAGE
PROPERTY NAME (SQ. FT.) (SQ. FT.) (SQ. FT.) (SQ. FT.) FT.) (SQ. FT.) LEASED(4) RENT(5) PSF (6) RENT(7)
------------- ---------- --------- --------- ---------- -------- --------- --------- ----------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Kmart (Los Banos, CA)........ 86,479 - - - - 86,479 100.0 365,373 4.22 -
Kmart (Madera, CA)........... 86,479 - - - - 86,479 100.0 415,951 4.81 -
Kmart (Phoenix, AZ).......... 104,204 - - - - 104,204 100.0 551,576 5.29 -
Kmart (Rocklin, CA).......... 86,479 - - - - 86,479 100.0 411,132 4.75 -
Oracle Road.................. 102,400 - - - - 102,400 100.0 537,600 5.25 -
SAM's Club (Downey, CA)...... 110,822 3,900 - - - 114,722 100.0 730,000 6.36 68,131
SAM's Club (Fountain Valley,
CA)......................... 110,784 8,342 - - - 119,126 100.0 1,058,990 8.89 46,158
Sears........................ 134,644 - - - - 134,644 100.0 350,380 2.60 -
Smitty's..................... 103,025 3,240 - - - 106,265 100.0 348,134 3.28 -
Vons (Escondido, CA)......... 36,800 - - - - 36,800 100.0 312,800 8.50 -
Vons (Simi Valley, CA)....... 105,000 - - - - 105,000 100.0 825,418 7.86 -
--------- ------- --------- ------- ------- --------- ----------- --------
1,347,239 15,482 - - - 1,362,721 100.0 7,743,192 5.86 114,289
--------- ------- --------- ------- ------- --------- ----------- --------
SUBTOTAL STABILIZED
PROPERTIES.................4,118,654 437,982 1,016,137 228,741 56,057 5,857,571 96.1 60,600,613 10.80 486,919
--------- ------- --------- ------- ------- --------- ----------- --------
REDEVELOPMENT PROPERTIES
PROMOTIONAL/POWER CENTERS
Covina Town Square........... 171,233 6,500 48,597 30,037 115,283 371,650 88.3 2,151,602 9.51 89,930
Medford Center............... 115,313 9,216 50,431 5,433 160,283 340,676 97.0 1,624,993 7.01 193,672
--------- ------- --------- ------- ------- --------- ----- ----------- --------
SUBTOTAL REDEVELOPMENT
TOTAL PROPERTIES............4,405,200 453,698 1,115,165 264,211 331,623 6,569,897 95.8 $64,377,207 $10.61 $770,521
========= ======= ========= ======= ======= ========= =========== ========
PERCENT OF TOTAL GLA........ 67.05% 6.91% 18.44% 4.02% 3.58% 100.00%
========= ======= ========= ======= ======= =========
- ------------------------
</TABLE>
(1) Anchor tenants are defined as those retail tenants occupying more than
25,000 square feet of GLA, 10% of a Property's aggregate GLA, or which
represent a significant drawing power for the Property.
(2) "Pad" tenants means free-standing single tenants.
(3) Includes certain office space.
(4) Based upon Total GLA, excluding GLA to be Built.
(5) Total annualized base rents of the Company for leases signed as of December
31, 1996, excluding (i) percentage rents, (ii) additional amounts payable by
tenants such as common area maintenance, real estate taxes and other expense
reimbursements and (iii) future contractual rent escalations or cost of
living increases.
(6) Calculated as total annualized base rent divided by GLA actually leased as
of December 31, 1996.
(7) Annual percentage rent for the most recently reported 12-month period.
6
<PAGE>
The following table sets forth, as of December 31, 1996, square footage of
GLA at each Property leased to national, regional and local retail tenants:
<TABLE>
<CAPTION>
TYPE OF RETAIL TENANT
---------------------
PROPERTY NAME NATIONAL(1) REGIONAL(2) LOCAL(3) TOTAL
------------- ------------ ----------- ---------- ----------
<S> <C> <C> <C> <C>
STABILIZED PROPERTIES
REGIONAL MALLS
Baldwin Hills Crenshaw Plaza.............. 176,216 35,009 118,645 329,870
Media City Center......................... 540,768 79,257 97,261 717,286
PROMOTIONAL/POWER CENTERS
El Camino North........................... 175,756 27,885 111,372 315,013
Empire Center............................. 124,653 28,130 83,929 236,712
Fullerton Town Center..................... 160,342 10,185 50,778 221,305
Gresham Town Fair......................... 72,612 57,011 128,775 258,398
Montebello Town Square.................... 216,056 15,061 14,359 245,476
The City Center........................... 185,750 0 8,443 194,193
NEIGHBORHOOD/COMMUNITY SHOPPING CENTERS
Advantage/Sportmart Shopping Center....... 109,810 4,275 3,375 117,460
Country Fair Shopping Center.............. 95,605 30,890 29,836 156,331
Date Palm Center.......................... 99,919 1,225 12,904 114,048
Fire Mountain Center...................... 60,198 7,500 16,173 83,871
Gardena Gateway Center.................... 24,362 22,000 19,625 65,987
Huntington Center......................... 105,879 0 0 105,879
Kenneth Hahn Plaza........................ 77,936 43,790 21,083 142,809
La Verne Towne Center..................... 186,589 5,807 18,039 210,435
Lakewood Plaza............................ 99,331 7,525 6,655 113,511
Parkway Place............................. 107,928 0 6,848 114,776
Pomona Gateway Center..................... 17,680 85,225 5,982 108,887
Rosedale Village Shopping Center.......... 37,229 48,212 35,428 120,869
San Fernando Mission Plaza................ 0 56,949 10,243 67,192
Vermont-Slauson Shopping Center........... 120,790 36,770 12,184 169,744
SINGLE TENANT FACILITIES
Home Base................................. 107,165 0 0 107,165
Kmart (Banning, CA)....................... 86,479 0 0 86,479
Kmart (El Centro, CA)..................... 86,479 0 0 86,479
Kmart (Los Banos, CA)..................... 86,479 0 0 86,479
Kmart (Madera, CA)........................ 86,479 0 0 86,479
Kmart (Phoenix, AZ)....................... 104,204 0 0 104,204
Kmart (Rocklin, CA)....................... 86,479 0 0 86,479
Oracle Road............................... 102,400 0 0 102,400
SAM's Club (Downey, CA)................... 110,822 0 3,900 114,722
SAM's Club (Fountain Valley, CA).......... 119,126 0 0 119,126
Sears..................................... 134,644 0 0 134,644
Smitty's.................................. 3,240 103,025 0 106,265
Vons (Escondido, CA)...................... 0 36,800 0 36,800
Vons (Simi Valley, CA).................... 0 105,000 3,900 105,000
--------- ------- ------- ---------
SUBTOTAL STABILIZED PROPERTIES......... 3,909,405 847,531 815,837 5,572,773
--------- ------- ------- ---------
REDEVELOPMENT PROPERTIES
PROMOTIONAL/POWER CENTERS
Covina Town Square........................ 193,631 0 32,699 226,330
Medford Center............................ 80,393 61,899 32,668 174,960
--------- ------- ------- ---------
SUBTOTAL REDEVELOPMENT PROPERTIES...... 274,024 61,899 65,367 401,290
--------- ------- ------- ---------
TOTAL ALL PROPERTIES................... 4,183,429 909,430 881,204 5,974,063
========= ======= ======= =========
PERCENT OF TOTAL LEASED GLA............... 70.03% 15.22% 14.75% 100.00%
========= ======= ======= =========
- -----------------
</TABLE>
(1) National tenant refers to a business operating in three or more metropolitan
areas located in at least three separate states.
(2) Regional tenant refers to a business operating in more than one metropolitan
area in one or two states. Includes financial institutions.
(3) Local tenant refers to a business operating in only one metropolitan area.
7
<PAGE>
The following table sets forth, as of December 31, 1996, the annualized
base rent of all of the Properties, the percentage of annualized base rent, the
average rent per square foot and the percentage leased, broken down by type of
tenant:
<TABLE>
<CAPTION>
AVERAGE
% OF TOTAL ANNUAL BASE
ANNUALIZED ANNUALIZED RENT PER PERCENT
TYPE OF SPACE BASE RENT BASE RENT SQUARE FOOT LEASED
- ------------- ------------ ----------- ----------- --------
<S> <C> <C> <C> <C>
Anchor.......... $37,012,756 57.49% $ 8.24 95.46%
Pad............. 6,501,608 10.10% 14.07 84.06%
Shop............ 20,862,843 34.84% 18.71 84.88%
----------- ------
TOTAL......... $64,377,207 100.00% $10.61
=========== ====== ======
</TABLE>
TENANT CONCENTRATION
The following table sets forth, as of December 31, 1996, information as to
anchor and/or national retail tenants which individually accounted for at least
1.0% of total annualized base rent of the Properties:
<TABLE>
<CAPTION>
PERCENTAGE
NUMBER OF TOTAL TOTAL
OF ANNUALIZED ANNUALIZED TENANT PERCENTAGE
RETAIL TENANT (1) STORES BASE RENT BASE RENT GLA OF TOTAL GLA
- ------------------ ------ ----------- ----------- --------- -------------
<S> <C> <C> <C> <C> <C>
AMC Theatres 5 $ 3,478,530 5.40% 163,752 2.62%
Lucky Stores, Inc. 5 3,099,050 4.81 308,170 4.94
Kmart Corp. 7 2,927,871 4.55 619,103 9.92
SAM's Club/Wal-Mart Stores 3 2,899,028 4.50 321,525 5.15
Vons Companies, The 4 2,305,718 3.58 273,168 4.38
Toys 'R' Us 4 2,018,462 3.14 199,710 3.20
Magic Johnson Theatres 1 1,241,943 1.93 57,955 0.93
Sears Roebuck & Co. 3 1,200,378 1.86 312,537 5.01
The Limited Stores 7 1,128,709 1.75 68,944 1.11
Office Depot 4 1,107,518 1.72 100,247 1.61
Dayton Hudson (Mervyn's/Target) 2 1,031,500 1.60 198,138 3.18
Montgomery Ward 3 972,872 1.51 152,640 2.45
Home Base 1 870,180 1.35 107,165 1.72
Federated Department Stores 1 847,242 1.32 220,800 3.54
Home Depot 1 805,000 1.25 102,485 1.64
Payless ShoeSource, Inc. 10 782,573 1.22 34,297 0.55
Staples, Inc. 3 738,886 1.15 69,935 1.12
Cinemark USA, Inc. 1 715,500 1.11 56,859 0.91
Virgin Records Megastore 1 675,000 1.05 30,000 0.48
Sport Chalet Sporting Goods 1 674,355 1.05 44,957 0.72
Barnes & Noble 2 670,415 1.04 35,285 0.57
----------- ----- --------- -----
TOTAL........................... $30,190,730 46.90% 3,477,672 55.75%
=========== ===== ========= =====
</TABLE>
____________________
(1) Excludes non-owned Anchors.
8
<PAGE>
TENANT LEASE EXPIRATIONS AND RENEWALS
The following table sets forth, as of December 31, 1996, tenant lease
expirations for the next ten years at the Properties, assuming that no tenants
exercise renewal options:
<TABLE>
<CAPTION>
AVERAGE BASE PERCENT OF
APPROX. ANNUALIZED RENT PER TOTAL LEASED
GLA OF MINIMUM RENT SQUARE FOOT SQUARE FOOTAGE
NO. OF EXPIRING UNDER UNDER REPRESENTED
LEASES LEASES EXPIRING EXPIRING BY EXPIRING
LEASE EXPIRATION YEAR EXPIRING (SQ. FT.) LEASES LEASES LEASES
- ----------------------- -------- ---------- ------------ ------------ ---------------
<S> <C> <C> <C> <C> <C>
1997.................... 122 230,818 $ 3,877,092 $16.80 3.80
1998.................... 80 202,441 3,088,950 15.26 3.34
1999.................... 85 244,749 3,642,893 14.88 4.03
2000.................... 71 242,851 3,344,001 13.77 4.00
2001.................... 99 306,228 4,942,700 16.14 5.04
2002.................... 53 431,337 3,623,815 8.40 7.11
2003.................... 25 185,126 2,466,406 13.32 3.05
2004.................... 30 376,241 2,962,303 7.87 6.20
2005.................... 26 207,702 3,765,900 18.13 3.42
2006.................... 27 246,448 3,318,105 13.46 4.06
Thereafter.............. 109 3,396,238 29,345,042 8.64 55.95
--- --------- ----------- ------
TOTAL................. 727 6,070,179 $64,377,207 $10.61 100.00%
=== ========= =========== ====== ======
</TABLE>
DEBT SECURED BY PROPERTIES
The following table summarizes the outstanding indebtedness secured by the
Company's Properties as of December 31, 1996.
<TABLE>
<CAPTION>
OUTSTANDING INTEREST YEAR OF
BALANCE RATE MATURITY
-------------- ------------ --------
(in thousands)
<S> <C> <C> <C>
Notes Payable - Insurance Companies:
Covina Town Square $ 18,099 9.60% 2004
Date Palm Center 9,626 10.45 2002
Vons (Escondido) 2,762 9.30 1999
Fire Mountain Center 7,570 10.25 1999
Home Base 6,158 9.50 1999
Gardena Gateway Center 6,772 10.05 2002
Gresham Town Fair 10,058 7.50 1999
Note Payable - Pension Fund (1) 31,658 11.45 2006
Note Payable - Pension Fund (1) 10,195 10.90 2006
Note Payable - Financial Institution (2) 22,688 8.94 2005
Note Payable - Financial Institution (2) 33,692 9.00 2010
Tax Exempt Floating Rate Debt:
Baldwin Hills Crenshaw Plaza 30,000 5.30 2014
Kenneth Hahn Plaza 6,000 5.30 2015
Secured line of credit (3) 41,200 7.00 1998
--------
TOTAL (4) $236,478 8.62%(5)
======== =====
</TABLE>
9
<PAGE>
_________________
(1) Represents two notes payable to a pension fund which are cross-
collateralized by the following properties; Kmart (Rocklin), Kmart (El
Centro), Kmart (Banning), Kmart (Los Banos), Kmart (Madera), Kmart
(Phoenix), Advantage/Sportmart Shopping Center, Huntington Center, Oracle
Road, Vons (Simi Valley), Lakewood Plaza, Sam's Club (Downey), and Parkway
Place.
(2) This note is in two tranches which are cross-collateralized by the
following properties; San Fernando Mission Plaza, Rosedale Village, Country
Fair Shopping Center, Fullerton Town Center, La Verne Town Center, and
Sam's Club (Fountain Valley).
(3) As of December 31, 1996, the Company had a line of credit outstanding with
a financial institution (the "Credit Facility"), due May 1998. The Credit
Facility is secured by Montebello Town Square, The City Center, and Media
City Center. Subsequent to December 31, 1996, the Company drew down an
additional $8 million against the Credit Facility.
(4) Total debt does not include $6,163,000 of Community Facilities District
Special Tax Bonds (CFD) issued by the City of Fontana, California. Debt
service is provided through a special tax assessment on the parcels of land
within the Empire Center.
(5) Weighted average rate of interest on mortgage debt.
Aggregate future principal payments by year on the balance of mortgage
indebtedness, including $41,200,000 due on the secured line of credit in 1998,
as of December 31, 1996 is as follows:
<TABLE>
<CAPTION>
AGGREGATE
YEAR PRINCIPAL PAYMENTS
----- ------------------
<S> <C>
1997............. $ 2,426
1998............. 43,885
1999............. 28,070
2000............. 2,771
2001............. 3,082
2002............. 18,457
2003............. 3,489
2004............. 20,391
2005............. 24,473
2006............. 23,605
Thereafter....... 65,829
--------
Total.......... $236,478
========
</TABLE>
DEVELOPMENT PROPERTIES
Certain properties had not completed their initial leasing plans at the
date of the Company's initial public offering; Media City Center, Baldwin Hills
Crenshaw Plaza, Empire Center, Montebello Town Square and The City Center (the
"Development Properties"). Pursuant to an agreement among the Operating
Partnership and certain limited partners that transferred the Development
Properties to the Operating Partnership such OP limited partners had the right
to receive additional partnership units in the Operating Partnership ("OP
Units") based upon the increase in net annualized cash flow from the Development
Properties between October 31, 1993 and the expiration of the applicable lease-
up period for each development property. The increase in net annualized cash
flow was based on leases signed by March 31 with the tenant open and paying rent
by June 30 of the respective lease-up periods.
The lease-up period for Montebello Town Square and The City Center expired
on March 31, 1995 and resulted in the issuance of an additional 113,506 OP Units
to the OP Limited Partners. In connection with this issuance of additional OP
Units, all of the leases were executed by March 31, 1995, with tenants paying
rent by June 30, 1995, including certain leases where tenants were not open by
June 30, 1995. The independent directors determined that it was appropriate to
issue additional OP Units for all of these leases.
The lease-up period for Media City Center, Baldwin Hills Crenshaw Plaza and
Empire Center expired on March 31, 1996. In connection with the completion of
construction at Empire Center, certain improvements constructed during the
lease-up period were not leased as of March 31, 1996. The independent directors
determined that, the cost of construction of such improvements should be borne
by the Company for purposes of calculating the
10
<PAGE>
issuance of additional OP Units for Empire Center and no OP Units would be
issuable to the Predecessor Affiliates in connection with such unleased
improvements. During the year ended December 31, 1995, the opening of
approximately 38,000 square feet of retail and restaurant space at Media City
Center, principally comprising a 30,000 square foot Virgin Megastore, and the
57,000 square foot Sony/Magic Johnson Theatres at Baldwin Hills Crenshaw Plaza,
represented expansion of the Development Properties not contemplated at the IPO
and therefore no additional OP Units were issued in connection with such
expansions.
On August 12, 1996, the Independent members of the Board of Directors
approved the issuance of 3,242,379 OP Units to the Predecessor Affiliates. The
market capitalization of the OP was thereby increased by $41.7 million based
upon the stock price as of August 12, 1996. The Predecessor Affiliates'
interest in the OP was thereby increased from 8% to approximately 26% effective
July 1, 1996. As a result of the issuance in the third quarter of the 3,242,379
OP Units, minority interest was increased and additional paid-in capital
decreased by approximately $31.5 million. The issuance of such additional OP
Units in the third quarter of 1996 did not have a dilutive effect on net income
per share. The number of OP Units issued and outstanding as of December 31,
1996 was 4,286,456.
PARTIALLY-OWNED PROPERTIES
The Operating Partnership owns partnership interests in the owners of the
two "Partially-Owned Properties." The Operating Partnership owns a 75% managing
general partnership interest in the partnership that owns Kenneth Hahn Plaza and
an 85% managing general partnership interest in Haagen-Central Partnership, the
general partnership which is the managing general partner of, and holds a 40%
interest in, the partnership that owns Vermont-Slauson Shopping Center.
Therefore, the Operating Partnership holds the equivalent of a 34% interest in
Vermont-Slauson Shopping Center.
The Operating Partnership is the managing general partner of each such
partnership, with control over day-to-day operations of the Partially-Owned
Properties. The Company may have certain fiduciary responsibilities to its
outside partners which it will need to consider when making decisions relating
to the Partially-Owned Properties. The consent of the Company's outside
partners may be required for any sale, transfer or encumbrance of the Partially-
Owned Properties. In addition, the sale, transfer, assignment or pledge of
partnership interests in the partnerships which own the Partially-Owned
Properties require the prior written consent of the other partners or are
subject to certain rights of first refusal.
OTHER ASSETS OF THE COMPANY
The Company's interest in Media City Center (Burbank, California) includes
an interest in two promissory notes issued by the Redevelopment Burbank Agency
of the City of Burbank (the "Burbank Agency") which mature on February 1, 2016.
The first note is unsecured and was issued by the Burbank Agency on November 15,
1989 with an $18.5 million principal amount and bears interest at 9.25% per
annum. The note is nonrecourse to the Burbank Agency. On each semi-annual
payment date the Burbank Agency is required to make payments on the note to the
extent of 70% of the real property tax increment generated by Media City Center,
with certain exceptions. The second note is secured by certain tax revenues and
was issued by the Burbank Agency on December 6, 1990 with a $33 million initial
principal amount and bears interest at 9.25% per annum. The note is nonrecourse
to the Burbank Agency but is secured by certain real property tax increments
generated by the property as well as certain sales and use taxes generated by
the property. On each semi-annual payment date the Burbank Agency is required
to make payments on the note only to the extent of such tax items, less rent
paid by Macy's (formerly Bullock's). Any amount which accrues under the notes
that is not required to be paid is added to the principal amount of such notes.
Any principal or interest due on either of the notes which has not been paid
(due to the permitted reductions and limitation on payments described above) as
of their respective maturity dates will be forgiven, and it is not likely that
the full face amount of the notes and the interest thereon will be paid by such
maturity dates. During the years ended December 31, 1996, 1995 and 1994, the
Company recognized income of approximately $2,797,000, $2,756,000, and
$2,262,000 respectively, pursuant to the terms of such agency note agreements.
11
<PAGE>
Under similar commitments from the Community Redevelopment Agencies of the
Cities of Fullerton and Chino, other income was recognized for the years ended
December 31, 1996 and 1994 from Fullerton Town Center of $57,000, $59,000 and
$79,000 respectively, and Country Fair Shopping Center of $146,000, $122,000 and
$92,000, respectively. Such commitments expire in 2013 and 2001 for Fullerton
and Chino, respectively, and any balance owing to the Company at expiration will
be forgiven and discharged.
Such commitments have not been recorded as assets in the Company's
financial statements as they are contingent in nature.
ENVIRONMENTAL AND OTHER REGULATORY REQUIREMENTS
Under various federal, state and local laws, ordinances and regulations, an
owner or operator of real property may become liable for the costs of removal or
remediation of certain hazardous or toxic substances on or in its properties.
Such laws may impose such liability without regard to whether the Company knew
of, or was responsible for, the presence of such hazardous or toxic substances.
The costs of investigation, removal, or remediation of such substances may be
substantial and the presence of such substances, or the failure to properly
remediate such substances, may adversely affect the Owner's ability to sell such
real estate or to borrow using such real estate as collateral. In connection
with its ownership and operation of properties, the Company may be potentially
liable under such laws and may incur costs in responding to such liabilities.
No assurance can be given that any existing environmental studies with respect
to any of the Properties reveal all environmental liabilities, that any prior
owner or tenant of a Property did not create any material environmental
condition not known to the Company, that future laws, ordinances or regulations
will not impose any material environmental liability, or that a material
environmental condition does not otherwise exist as to any one or more
Properties.
Pursuant to an Environmental Indemnity Agreement the transferors of the 36
properties acquired at the time of the Company's formation in December 1993 (the
"Original Properties") have agreed to provide certain indemnities to the Company
for environmental liabilities that may arise with respect to any contamination
on or affecting the condition of the Original Properties which was known as of
December 27, 1993 or which becomes known after December 27, 1993 as a result of
additional environmental testing commenced prior to December 27, 1993. Pursuant
to the transfer documents with respect to the 1994 Acquisition Properties (as
defined above - Item 2. Properties), the transferors of such properties provided
certain indemnities with respect to environmental liabilities to the Company.
Because responsibility for such matters is being retained by such Predecessor
Affiliates and the transferors of the 1994 Acquisition Properties, no
liabilities have been recorded in the financial statements of the Company in
respect of such matters. No environmental costs were incurred during the years
ended December 31, 1996, 1995 and 1994 by the Company.
The Properties are subject to the Americans with Disabilities Act of 1990
(the "ADA"). The ADA has separate compliance requirements for "public
accommodations" and "commercial facilities" but generally requires that all
public facilities be made accessible to people with disabilities. These
requirements became effective in 1992. Although the Company believes that the
Properties are substantially in compliance with the present requirements of the
ADA, the Company may incur additional costs of complying with the ADA in the
future. However, the Company does not believe that such costs of compliance
will have a material effect on the Company.
ITEM 3. LEGAL PROCEEDINGS
The Company is subject to various legal proceedings and claims that arise
in the ordinary course of business. These matters are generally covered by
insurance. While the resolution of these matters cannot be predicted with
certainty, management believes, based on currently available information, that
the final outcome of such matters will not have a material adverse effect on the
financial position or results of operations of the Company.
12
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of 1996, no matters were submitted for a vote of
stockholders of the Company.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
The Company's Common Stock is listed on the American Stock Exchange under
the symbol "ACH." At February 28, 1997, the Company had approximately 178
stockholders of record and approximately 4,600 beneficial owners.
<TABLE>
<CAPTION>
DIVIDENDS
DECLARED
THREE MONTHS ENDED: HIGH LOW PER SHARE
---------------------- ------- ------- ---------
<S> <C> <C> <C>
December 31, 1996 $15.000 $13.750 $0.36
September 30, 1996 14.500 12.250 0.36
June 30, 1996 13.375 10.875 0.36
March 31, 1996 12.125 11.500 0.36
December 31, 1995 12.750 10.625 0.36
September 30, 1995 12.750 11.375 0.36
June 30, 1995 14.125 10.750 0.36
March 31, 1995 16.750 13.500 0.36
</TABLE>
Distributions included a return of capital component of 76%, 60% and 76%,
for the years ended December 31, 1996, 1995 and 1994, respectively. All
distributions will be made by the Company at the discretion of the Board of
Directors and will depend on the earnings of the Company, its financial
condition and such other factors as the Board of Directors deems relevant. In
order to qualify for the beneficial tax treatment accorded to real estate
investment trusts under the Internal Revenue Code, the Company is required to
make distributions to holders of its shares which actually will be at least 95%
of the Company's "real estate investment trust taxable income," as defined in
Section 857 of the Code.
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial data for the Company and
the Predecessor Affiliates on a historical basis. The following data should be
read in conjunction with management's discussion and analysis of financial
conditions and results of operations and all of the financial statements and
notes thereto included elsewhere in this Form 10-K.
13
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA AND NUMBER OF PROPERTIES)
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Total operating revenues $ 87,719 $ 81,323 $ 73,199 $ 54,795 $ 39,439
-------- -------- -------- -------- --------
Expenses:
Interest.............................. 35,516 32,304 27,952 33,373 24,222
Property operating costs.............. 25,633 26,059 21,299 20,215 13,830
Depreciation and amortization......... 17,118 20,018 18,695 14,143 9,767
General & administrative.............. 5,064 5,334 3,260 2,047 2,594
-------- -------- -------- -------- --------
Total expenses.......................... 83,331 83,715 71,206 69,778 50,413
-------- -------- -------- -------- --------
Income (loss) before non-recurring and
other items........................... 4,388 (2,392) 1,993 (14,983) (10,974)
Non-recurring........................... (6,638) - - (1,578) -
Equity in income of management
company and joint venture............. - 4 137 122 124
Minority interests...................... 245 (20) (460) (382) (299)
Extraordinary items..................... - - - (9,905) -
-------- -------- -------- -------- --------
Net income (loss)....................... $ (2,005) $ (2,408) $ 1,670 $(26,726) $(11,149)
======== ======== ======== ======== ========
Net income (loss) per share............. $ (0.17) $ (0.20) $ 0.14
Dividends per share..................... 1.44 $ 1.44 $ 1.44
Weighted average shares of common
stock outstanding..................... 12,024 11,964 11,678
OTHER DATA:
Funds from Operations(1):
Primary............................... $ 20,893 $ 17,075 $ 20,249
Fully diluted......................... 34,765 $ 30,493 $ 34,230
Number of operating Properties
(at end of period)..................... 38 40 40 36 34
Gross Leasable Area owned (sq. ft.)
(at end of period) .................... 6,570 6,740 6,450 5,448 4,842
<CAPTION>
DECEMBER 31,
-----------------------------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Real estate before accumulated
depreciation........................... $659,565 $653,058 $618,427 $553,414 $464,418
Total assets............................ 594,876 605,777 590,030 541,738 450,878
Total debt and other liabilities........ 434,603 421,561 385,258 330,105 477,697
Minority interests...................... 43,647 16,765 18,433 18,549 2,750
Stockholders' equity (deficit).......... 116,626 167,451 186,339 193,084 (29,569)
</TABLE>
- --------------------
(1) The Company computes funds from operations ("FFO") on both a primary and a
fully diluted basis and con siders Operating Partnership Units as the
equivalent of shares for the purpose of these computations. The fully
diluted basis assumes the conversion of the convertible and exchangeable
debentures into shares of common stock. For further discussion of FFO, see
Item 7 - Management's Discussion and Analysis of Results of Operations.
14
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
The following discussion should be read in conjunction with the "Selected
Financial Data" and the Company's Consolidated Financial Statements and Notes
thereto appearing elsewhere in this Form 10-K. Such financial statements and
information have been prepared to reflect the historical combined operations and
assets and liabilities of the Predecessor Affiliates prior to the completion of
the Company's initial public offering and related transactions on December 27,
1993 (the "Formation Transactions") and the operations of the Company since
December 27, 1993.
During the period covered by the Consolidated Financial Statements, the
Company has been developing and continuing to lease several significant
Properties. As a normal result of the Company's development and/or
redevelopment activities with respect to its properties, the Company typically
incurs losses from operations during the construction phase and the subsequent
lease-up phase. These losses are the result of expenses, principally interest
and depreciation costs, and to a limited extent, certain operating expenses
exceeding rental revenues during such period. The Company anticipates that
these types of losses will be incurred as a normal part of the Company's
operations to the extent that it develops or redevelops properties in the
future. The Company believes that the performance of the other Properties, as a
whole, in the periods reflected in the Consolidated Financial Statements does
not differ materially from that reflected by current average occupancy levels
and rents for these Properties.
The management and development activities of the Predecessor Affiliates
were conducted through The Alexander Haagen Company, Inc., a California
corporation, which received management fees for such activities. Currently, the
Company is self-administered and self-managed. The Company's revenues have
been, and are expected to continue to be, derived primarily from minimum rents,
percentage rents and expense reimbursements.
RESULTS OF OPERATIONS
Comparison of the year ended December 31, 1996 to the year ended December 31,
1995.
Operating revenues increased by $6.4 million to $87.7 million for the year
ended December 31, 1996 from $81.3 million for the year ended December 31, 1995.
The increase was primarily a result of the lease-up of the Development
Properties, comprising Media City Center, Empire Center and Baldwin Hills
Crenshaw Plaza. However, improvements in the economic performance of the
properties were mitigated by the Company recording reserves to offset the
straight-lining of contractual rent increases. No Straight-line rental revenue
was recognized in the year ended December 31, 1996, compared to approximately
$1.3 million in the year ended December 31, 1995.
Interest expense increased by $3.2 million from $32.3 million for the year
ended December 31, 1995 to $35.5 million for the year ended December 31, 1996.
The increase is principally a function of borrowings on the Company's line of
credit to finance construction and redevelopment activity at various properties.
Depreciation and amortization expense decreased by $2.9 million from $20.0
million for the year ended December 31, 1995 to $17.1 million for the year ended
December 31, 1996. Depreciation decreased by $4.8 million as a result of a
change in the depreciable lives of the properties. The Company concluded that
in order to more appropriately align the depreciable lives with the economic
lives of the properties the lives should generally be increased to 40 years from
previously utilized lives ranging from 20 to 31.5 years. This decrease was
offset by a $1.9 million increase as a result of an overall increase in
investment in rental properties.
Property operating costs decreased by $.5 million to $25.6 million for the
year ended December 31, 1996 from $26.1 million for the year ended December 31,
1995. The decrease is a result of several factors including additional bad debt
expense recorded in 1995 at certain of the properties.
15
<PAGE>
During 1996, the Company sold two single tenant facilities for $6.3 million
in cash, resulting in a net gain on sale of $2.4 million.
During the first quarter of 1996, the Company reassessed the recoverability
of straight-line contractual rent increases as a result of the continuing
mergers and consolidations within the retail industry and the financial
difficulties of certain retailers. Accordingly, the Company recorded a non-
recurring non-cash charge of $6.9 million to increase the reserve against the
receivable for straight-line rents. Additionally, the Company has fully
reserved against unbilled deferred rents in 1996. The company believes this to
be an appropriate and conservative approach to account for the straight-lining
of contractual rent increases in the current retail environment. The impact of
this change was a reduction in revenues recognized in 1996 of approximately $1.3
million.
On October 31, 1996, the Sears store in the Covina Town Square power center
(Covina, California) vacated its premises. Annual rental revenues received from
Sears were $851,000. The Company has signed a lease with AMC Theatres to
construct a 30 screen multiplex theater on the former Sears site; however, until
completion of the theater the impact from the loss of the Sears revenues will be
up to $0.015 per share on a quarterly basis. In connection with signing the
lease with AMC Theatres, the Company recorded a non-recurring non-cash charge of
$2.1 million to write-off the net book value of the existing Sears building.
Covina Town Square is a 422,000 square foot power center; other tenants include
Home Depot, Petsmart and Staples.
The non-recurring items detailed in the above three paragraphs aggregate to
a net charge of $6.6 million.
General and administrative expenses declined by $0.2 million from $5.3
million for the year ended December 31, 1995 to $5.1 million for the year ended
December 31, 1996 principally as a result of the write-off in the first quarter
of 1995 of costs related to a potential secondary offering.
Loss from operations before minority interests decreased by $0.1 million
from a loss of $2.4 million for the year ended December 31, 1995 to a loss of
$2.3 million for the year ended December 31, 1996 for the reasons stated above.
Comparison of the year ended December 31, 1995, to the year ended December 31,
1994.
Revenues increased by $8.1 million to $81.3 million for the year ended
December 31, 1995 from $73.2 million for the year ended December 31, 1994. The
1994 Acquisition Properties contributed $5.2 million of the increase (see Item
2. Properties). Three properties, Empire Center, Baldwin Hills Crenshaw Plaza,
and Media City Center, contributed the majority of the balance of the increase
in revenues (see further discussion under "Impact of Certain Properties" below).
Media City Center represented $1.9 million of such increase, while Baldwin Hills
Crenshaw Plaza, represented an additional $1.6 million. These increases are
offset by decreases in rental revenues at certain of the Company's other
properties.
Operating expenses (including property operating costs and general and
administrative expenses) increased by $6.8 million to $31.4 million for the year
ended December 31, 1995 from $24.6 million for the year ended December 31, 1994.
The increase is a result of several factors including: $1.6 million in
operating expenses related to the 1994 Acquisition Properties; $0.6 million in
increased operating expenses at Media City Center, Baldwin Hills Crenshaw Plaza
and Empire Center; a $1.0 million increase in bad debt expenses; the write-off
of $0.4 million in deferred costs incurred with respect to a potential secondary
offering; $0.8 million in supplemental tax assessments received on a number of
the Company's properties; an increase in executive and property management fees
paid to HPMI of $1.3 million, as a result of a decrease in commission income and
other fees at HPMI; and an increase in other operating costs at the Company.
Depreciation and amortization expense increased by $1.3 million, from $18.7
million in 1994 to $20.0 million in 1995, as a result of an overall increase in
investment in rental properties.
Interest expense increased by $4.3 million from $28.0 million for the year
ended December 31, 1994 to $32.3 million for the year ended December 31, 1995.
The increase resulted from the increased debt associated with the 1994
Acquisition Properties, the $56.9 million fixed rate loan with a financial
institution in March 1995, which refinanced lower-cost floating rate debt (see
Liquidity and Capital Resources, below), borrowings on the Company's
16
<PAGE>
Credit Facility to finance development activity, and an increase in interest
costs on the Company's floating rate tax-exempt financing.
Income from operations decreased by $4.4 million to a loss of $2.4 million
for the year ended December 31, 1995 from net income of $2.0 million for the
year ended December 31, 1994 for the reasons stated above. See also "Impact of
Certain Properties" below.
Impact of Certain Properties
During the past three years, three Properties (Empire Center, Baldwin Hills
Crenshaw Plaza and Media City Center) have been under various stages of
development or continuing lease-up. Increases in cash flow at these Properties
since the IPO resulted in the issuance during 1996 of additional OP units to
partners of certain Predecessor Affiliates as discussed under "Properties -
Development Properties."
Net Operating Income (defined as operating revenues less property operating
costs) for the Company's properties was as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Stabilized Properties $41,235 $40,765 $39,974
Development Properties:
Baldwin Hills Crenshaw Plaza 5,465 3,245 2,347
Empire Center 2,614 1,371 1,099
Media City Center 11,515 8,585 7,546
Redevelopment Property:
Medford Center 989 975 532
Other Income 268 323 402
------- ------- -------
$62,086 $55,264 $51,900
Net Operating Income ======= ======= =======
</TABLE>
Baldwin Hills Crenshaw Plaza: This regional mall was developed by a
Predecessor Affiliate during 1988 and 1989. As of December 31, 1990, the
Property was 57% leased. As a result of the low level of occupancy, the Company
commenced a program to significantly upgrade the tenant mix at this Property by
removing underperforming tenants and adding national tenants. While tenant
replacement initially resulted in increased losses due to write-offs, the
Company believes that the improved tenant mix positioned the Property for future
growth. During 1995 the Company added approximately 57,000 square feet of pre-
leased space. Following this revised leasing program, Company-owned GLA at the
property was approximately 94.3%, 89.7% and 80.4% leased as of December 31,
1996, 1995 and 1994, respectively.
Empire Center: A Predecessor Affiliate acquired this land and commenced
obtaining the necessary zoning and entitlements for the project in 1988.
Construction of the power center commenced in 1991, and the three anchors opened
for business in 1992. Construction and leasing activity at this Property
continued in 1996. As of December 31, 1996, 90.3% of the Company-owned GLA was
leased.
Media City Center: A Predecessor Affiliate commenced development of Media
City Center in 1989 and completed construction of the original mall during 1992.
During 1995, the Company added approximately 115,000 square feet of pre-leased
space. As of December 31, 1996, 1995 and 1994 the Company-owned GLA was 91.7%,
86.6% and 82.5% leased, respectively.
FUNDS FROM OPERATIONS
The Company considers FFO to be an alternative measure of the performance
of an equity REIT since such measure does not recognize depreciation and
amortization expenses as operating expenses. FFO was originally defined by the
National Association of Real Estate Investment Trusts ("NAREIT") as net income
plus depreciation and amortization, less gains on sales of properties. In a May
1995 white paper, NAREIT adopted a revised definition of FFO. The principal
change is that the revised definition does not permit depreciation or
amortization of non real estate assets to be added back in computing FFO. The
Company historically added back amortization
17
<PAGE>
of deferred financing costs in computing FFO. Additionally, the revised
definition also permits FFO to be adjusted for significant non-recurring items.
The Company adopted the revised definition of FFO commencing January 1,
1996. The Company has restated its FFO for comparable periods as if the new
definition had been adopted at that date. Management concurs with NAREIT in
believing that reductions for the depreciation and amortization of real estate
and its related costs are not meaningful in evaluating income-producing real
estate.
The Company computes FFO on both a primary and a fully diluted basis. The
fully diluted basis assumes the conversion of the convertible and exchangeable
debentures into shares of common stock. The following table summarizes the
Company's computation of FFO and provides certain additional disclosures
(dollars in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
--------- -------- --------
<S> <C> <C> <C>
Net Income (Loss) ($2,005) $(2,408) $ 1,670
Adjustments to reconcile net income
(loss) to funds from operations:
Depreciation and Amortization:
Buildings and improvements 11,615 17,046 16,343
Tenant improvements and allowances 4,284 2,310 2,080
Leasing costs 1,163 662 272
Non-recurring provision for unbilled
deferred rent 6,900 - -
Non-recurring charge for building demolition 2,144 - -
Gain on sale of rental property (2,406) - -
Minority Interests (802) (535) (118)
-------- ------- -------
Funds from Operations, primary 20,893 17,075 20,249
Debenture interest expense 12,573 12,570 12,686
Amortization of debenture financing costs 1,299 1,298 1,297
-------- ------- -------
Funds from Operations, fully diluted $ 34,765 $30,943 $34,230
======== ======= =======
SUPPLEMENTAL DISCLOSURES
Construction and development expenditures:
Expansion of portfolio $ 13,315 $34,116 $ 8,705
Releasing and maintenance of portfolio 635 515 -
-------- ------- -------
$ 13,950 $34,631 $ 8,705
======== ======= =======
Capitalized leasing costs:
Expansion of portfolio $ 2,106 $ 2,822 $ 3,332
Releasing and maintenance of portfolio 417 284 -
-------- ------- -------
$ 2,523 $ 3,106 $ 3,332
======== ======= =======
Straight-line rental income $ - $ 1,266 $ 2,859
======== ======= =======
</TABLE>
The Company considers any space that was vacant or unbuilt at the date of
its initial public offering to be expansion of its portfolio.
Funds from operations, on a primary basis, increased to $20.9 million for
the year ended December 31, 1996, as compared to $17.1 million for the same
period in 1995. On a fully diluted basis, assuming conversion of the
debentures, funds from operations increased to $34.8 million from $30.9 million.
The increase in funds from operations is principally a function of the
improvements in the operations of the Development Properties. However,
improvements in the economic performance of the properties were mitigated by the
Company recording reserves to offset the straight-lining of contractual rent
increases. During 1996, the Company recorded a charge of $6.9
18
<PAGE>
million to increase the reserve against the receivable for straight-line rents,
a $2.1 million charge to write-off the net book value of a building to be
demolished, and a net gain on sale of properties of $2.4 million. Such non-
recurring items were not included in the computation of FFO as the Company
considers them to be significant non-recurring events that if deducted would
materially distort the comparative measurement of Company performance.
Funds from operations do not represent cash flows from operations as
defined by Generally Accepted Accounting Principles and should not be considered
as an alternative to net income as an indicator of the Company's operating
performance or to cash flows as a measure of liquidity.
CASH FLOWS
Net cash provided by operations for the year ended December 31, 1996 was
$22.4 million compared to $19.9 million for the prior year. The principal
reasons for the increase in net cash from operations are discussed in results of
operations above.
Net cash used by investing activities decreased by $11.6 million to $20.5
million from $32.1 million for the prior year. This reflects a decrease in the
level of construction and development activity of $10.3 million, $5.0 million
paid in settlement of certain other liabilities and net proceeds from the sale
of two rental properties of $6.3 million. Net cash provided by financing
activities was $0.4 million for the year ended December 31, 1996, a decrease of
$10.9 million from the prior year. This decrease includes $2.6 million in
principal re-payments in connection with the sale of rental property, a decrease
in cash generated from restricted cash of $1.8 million, and a net $6.5 million
decrease in net additional borrowings.
Net cash provided by operations was $19.9 million for the year ended
December 31, 1995, compared to $21.4 million for the year ended December 31,
1994. The principal reasons for the decrease in net cash from operations are
discussed in Results of Operations -- above.
Net cash used by investment activities decreased to $32.1 million for the
year ended December 31, 1995 from $44.6 million for the year ended December 31,
1994. Investment activities in 1995 reflect an increase in the level of
construction activity; 1994 includes the $38.4 million cost of the 1994
Acquisition Properties. During the year ended December 31, 1995 the Company
generated $11.3 million from financing activities reflecting a decrease in
restricted cash of $2.7 million, $22.5 million in drawings on the Credit
Facility and a $56.9 million mortgage placed in March 1995, net of costs
incurred to obtain such financings of $2.3 million. These borrowings were
offset by the repayment of the outstanding balance on the Credit Facility of
$47.5 million, $1.9 million in principal amortization of senior indebtedness and
$19.1 million in distributions to stockholders, holders of OP Units and minority
interests.
LIQUIDITY SOURCES AND REQUIREMENTS
In December 1996, the Operating Partnership amended its revolving line of
credit (the "Credit Facility") by increasing the maximum borrowing limit to $90
million. Such increase was primarily to provide continued funding for the
Company's planned development and redevelopment activities. The Credit Facility
expires in May 1998 with interest at a floating rate equal to 1.5% over LIBOR
(7.0% at December 31, 1996). Borrowings under the Credit Facility are secured
by first mortgage liens on Montebello Town Square, The City Center, and Media
City Center. The OP also provided as additional security a negative pledge on
all unencumbered properties owned by the OP or its subsidiaries at any time
during the term of the Credit Facility. At February 28, 1997, outstanding
borrowings on the Credit Facility were approximately $49.2 million, with an
additional $6.6 million having been utilized to provide letters of credit.
In March, 1995 the Company obtained a $56.9 million loan agreement with a
financial institution. The loan is collateralized by miscellaneous properties,
bears interest at a weighted average interest rate of 8.98% and matures in two
tranches in 2005 and 2010. The Company used approximately $47 million of the
proceeds from the loan to reduce the then outstanding existing borrowings on its
Credit Facility.
19
<PAGE>
The Company anticipates investing approximately $33 million in tenant
improvements and developments as well as other planned improvements over the
next eighteen months which will be spent on various expansion and redevelopment
opportunities. The Company anticipates that such capital improvement
requirements for the Properties will be funded from its Credit Facility.
Loans maturing of $25.3 million in 1999 and $15.2 million in 2002, as well
as significant amounts due from 2004 to 2015, may require refinancing.
Additionally, the Company's secured line of credit is due in 1998 and the
convertible debentures of $138.6 million and exchangeable debentures of $30.0
million are due in 2001 and 2003, respectively. See "Item 2 -- Properties."
The Company believes, based on the collateral available within the Properties
and improvements in cash flow at the Development Properties, that it will be
able to effect such refinancings for the foreseeable future.
INFLATION
The Company's long-term leases contain provisions designed to mitigate the
adverse impact of inflation on its results from operations. Such provisions
include clauses enabling the Company to receive percentage rents based upon
tenants' gross sales, which generally increase as prices rise, and/or, in
certain cases, escalation clauses, which generally increase rental rates during
the terms of the leases. Such escalation clauses are often related to increases
in the CPI or similar inflation indices. In addition, many of the Company's
leases are for terms of less than ten years, which permits the Company to seek
to increase rents upon re-rental at market rates if rents are below then
existing market rates. Many of the Company's leases require the tenants to pay
a pro rata share of operating expenses, including common area maintenance, real
estate taxes, insurance and utilities, thereby reducing the Company's exposure
to increases in costs and operating expenses resulting from inflation.
FACTORS AFFECTING FUTURE RESULTS
Management's Discussion and Analysis of Financial Condition and Results of
Operations contains certain forward-looking statements that are subject to risk
and uncertainty. Investors and potential investors in the Company's securities
are cautioned that a number of factors could adversely affect the Company's
ability to obtain these results, including (a) the inability to lease currently
vacant space in the Companies properties; (b) the inability of tenants to pay
contractual rent and other expenses; (c) bankruptcies of tenants; (d) decisions
by tenants, and anchor retailers which own their own space, to close stores at
the Company's properties; (e) increases in certain operating costs at the
Company's properties; (f) decreases in rental rates available from tenants
leasing space at the Company's properties; (g) unavailability of financing for
acquisition, development and redevelopment of properties by the Company; (h)
increases in interest rates; and (i) a general economic downturn resulting in
lower retail sales and, in turn, store closures, rent delinquencies, reduced
percentage rents and other downward pressure on occupancies and rents at retail
properties.
20
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and
Stockholders of Alexander Haagen Properties, Inc.:
We have audited the consolidated balance sheets of Alexander Haagen
Properties, Inc. and subsidiaries (the "Company") as of December 31, 1996 and
1995, and the related consolidated statements of operations, stockholders'
equity and cash flows for each of the three years in the period ended December
31, 1996. Our audits also included the financial statement schedules listed in
the Index at Item 14. These consolidated financial statements and the financial
statement schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements and the financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company as of December 31,
1996 and 1995, and its results of operations and cash flows for each of the
three years in the period ended December 31, 1996 in conformity with generally
accepted accounting principles. Also, in our opinion, such financial statement
schedules, when considered in relation to the basic consolidated financial
statements taken as a whole, present fairly in all material respects the
information set forth therein.
DELOITTE & TOUCHE LLP
Los Angeles, California
February 28, 1997
21
<PAGE>
ALEXANDER HAAGEN PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
1996 1995
---------- ---------
<S> <C> <C>
ASSETS
Rental properties (Notes 2, 3, 4 and 5) $ 659,565 $653,058
Accumulated depreciation and amortization (104,330) (90,478)
--------- --------
Rental properties, net 555,235 562,580
Cash and cash equivalents 5,941 3,687
Tenant receivables, net (Note 2) 5,987 11,616
Other receivables (Note 2) 3,650 2,338
Receivable from management company (Note 11) 1,055 1,215
Investment in management company (Note 11) 621 621
Restricted cash (Note 4) 3,252 4,185
Deferred charges, net (Note 2) 18,365 18,719
Other assets 770 816
--------- --------
TOTAL $ 594,876 $605,777
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Secured Debt (Notes 4 and 10) $ 242,641 $223,524
7 1/2% Convertible subordinated debentures (Notes 5 and 10) 138,599 138,599
7 1/4% Exchangeable subordinated debentures (Notes 5 and 10) 30,000 30,000
Accrued distributions (Note 7) 7,039 4,705
Accrued interest 5,490 5,608
Accounts payable and other accrued expenses 5,340 5,453
Accrued construction costs 1,207 6,498
Other liabilities (Note 6) - 5,000
Tenant security and other deposits 4,287 2,174
--------- --------
Total liabilities 434,603 421,561
--------- --------
MINORITY INTERESTS (Notes 1, 2 and 12):
Operating Partnership 41,640 14,604
Other minorities 2,007 2,161
--------- --------
Total minority interests 43,647 16,765
--------- --------
COMMITMENTS AND CONTINGENCIES (Note 12)
STOCKHOLDERS' EQUITY (Notes 5, 7, and 8):
Common stock ($.01 par value, 50,000,000 shares authorized; 120 120
12,024,378 and 12,024,042 shares issued and outstanding
at December 31, 1996 and 1995, respectively)
Additional paid-in capital 174,792 206,297
Accumulated distributions and deficit (58,286) (38,966)
--------- --------
Total stockholders' equity 116,626 167,451
--------- --------
TOTAL $ 594,876 $605,777
========= ========
</TABLE>
See Notes to Consolidated Financial Statements.
22
<PAGE>
ALEXANDER HAAGEN PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE YEARS ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1996 1995 1994
-------- --------- --------
<S> <C> <C> <C>
REVENUES (Note 2):
Rental revenues $82,440 $76,840 $69,395
Percentage rents 771 480 478
Other income 4,508 4,003 3,326
------- ------- -------
Total revenues 87,719 81,323 73,199
------- ------- -------
EXPENSES:
Interest (Notes 2, 4 and 11) 35,516 32,304 27,952
Depreciation and amortization 17,118 20,018 18,695
Property operating costs:
Common area 13,587 13,885 11,800
Property taxes 7,488 7,866 6,188
Leasehold rentals (Note 12) 1,624 1,617 1,789
Marketing 1,121 1,073 880
Other operating 1,813 1,618 642
Non-recurring provision for
unbilled deferred rent (Note 2) 6,900 - -
Non-recurring charge for
building demolition 2,144 - -
General and administrative (Note 11) 5,064 5,334 3,260
------- ------- -------
Total expenses 92,375 83,715 71,206
------- ------- -------
INCOME (LOSS) FROM OPERATIONS BEFORE
OTHER ITEMS (4,656) (2,392) 1,993
NET GAIN ON SALE OF RENTAL PROPERTIES 2,406 - -
EQUITY IN INCOME OF MANAGEMENT COMPANY
(Note 11) - 4 137
MINORITY INTERESTS (Note 2):
Operating Partnership 526 209 (136)
Other minorities (281) (229) (324)
NET INCOME (LOSS) $(2,005) $(2,408) $ 1,670
======= ======= =======
NET INCOME (LOSS) PER SHARE (Note 2) $(0.17) $(0.20) $0.14
======= ======= =======
</TABLE>
See Notes to Consolidated Financial Statements.
23
<PAGE>
ALEXANDER HAAGEN PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
THREE YEARS ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK
---------------------- ADDITIONAL ACCUMULATED TOTAL
NUMBER OF PAID-IN DISTRIBUTIONS STOCKHOLDERS'
SHARES AMOUNT CAPITAL AND DEFICIT EQUITY
-------------- ------ ----------- -------------- --------------
<S> <C> <C> <C> <C> <C>
JANUARY 1, 1994 11,300,000 $113 $196,962 $ (3,991) $193,084
Conversions of Convertible
Debentures into Common Stock
(Note 5) 577,824 6 10,003 10,009
Adjustment in connection with
Formation (Note 2) (1,742) (1,742)
Adjustment in connection with
Operating Partnership ("OP")
Minority Interest (Note 2) 305 305
Net income 1,670 1,670
Distributions declared (Note 7) (16,987) (16,987)
---------- ---- -------- -------- --------
DECEMBER 31, 1994 11,877,824 119 205,528 (19,308) 186,339
Conversions of Convertible Debentures
into Common Stock (Note 5) 55,555 968 968
Conversions of OP Units into
Common Stock and effect of issuing
OP Units (Note 2) 90,663 1 (199) (198)
Net loss (2,408) (2,408)
Distributions declared (Note 7) (17,250) (17,250)
---------- ---- -------- -------- --------
DECEMBER 31, 1995 12,024,042 120 206,297 (38,966) 167,451
Adjustment in connection with issuance
of OP units (Note 11) (31,509) (31,509)
Exercise of stock options 336 4 4
Net Loss (2,408) (2,408)
Distributions declared (Note 7) (17,315) (17,315)
-------- --------
DECEMBER 31, 1996 12,024,378 $120 $174,792 $(58,286) $116,626
========== ==== ======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements
24
<PAGE>
ALEXANDER HAAGEN PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE YEARS ENDED DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (2,005) $ (2,408) $ 1,670
Adjustment to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization of rental properties 17,118 20,018 18,695
Amortization of deferred financing costs 2,058 1,861 1,670
Non-recurring provision for unbilled deferred rent 6,900 - -
Non-recurring charge for building demolition 2,144 - -
Net gain on sale of rental properties (2,406) - -
Equity in income of management company - (4) (137)
Minority interests in operations (245) 20 460
Net changes in operating assets and liabilities: (1,150) 423 (971)
-------- -------- --------
Net cash provided by operating activities 22,414 19,910 21,387
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of properties - - (42,756)
Construction and development costs (21,795) (32,075) (8,555)
Payment of other liabilities (5,000) - -
Proceeds from sale of rental properties 6,273 - 14
-------- -------- --------
Net cash used in investing activities (20,522) (32,075) (44,553)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds received from mortgage financing - 56,900 -
Principal payments on mortgage financing (4,883) (1,922) (1,801)
Borrowing on secured line of credit 28,000 22,500 42,145
Repayment of secured line of credit (4,000) (47,445) -
Costs of obtaining financing (284) (2,343) (251)
Decrease (increase) in restricted cash 933 2,710 (1,279)
Distributions to shareholders (17,315) (17,197) (16,779)
Distributions to minority interests (1,965) (1,877) (1,965)
Other (124) - (92)
-------- -------- --------
Net cash provided by financing activities 362 11,326 19,978
-------- -------- --------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 2,254 (839) (9,932)
CASH AND CASH EQUIVALENTS, AT BEGINNING OF YEAR 3,687 4,526 14,458
-------- -------- --------
CASH AND CASH EQUIVALENTS, AT END OF YEAR $ 5,941 $ 3,687 $ 4,526
======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements
25
<PAGE>
ALEXANDER HAAGEN PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE YEARS ENDED DECEMBER 31, 1996
1. BUSINESS
Alexander Haagen Properties, Inc., a Maryland corporation (the "Company"),
was organized in September 1993 as a self-administered and self-managed
real estate investment trust. The Company was formed to continue and
expand the business of The Alexander Haagen Company, Inc. ("AHC") and
certain of its affiliates (the "Predecessor Affiliates") and presently
engages in the ownership, management, leasing, acquisition, development and
redevelopment of retail shopping centers in California and other western
states.
As of December 31, 1996, the Company owned a portfolio comprised of
interests in 38 retail shopping centers (the "Properties"). All of the
Properties and assets in the Company's portfolio are held and operated by
Alexander Haagen Properties Operating Partnership, L.P., a California
limited partnership (the "Operating Partnership" or "OP"). The Company is
the sole general partner of the Operating Partnership and owns a 73.7%
interest therein. The Company conducts substantially all of its operations
through the Operating Partnership and generally has full, exclusive and
complete responsibility and discretion in the management and control of the
Operating Partnership. The Properties consist of regional malls,
power/promotional centers, neighborhood/community shopping centers and
single tenant facilities.
On December 27, 1993, the Company completed an initial public offering (the
"IPO") of 10,800,000 shares of common stock, and the public offering and
private placement of $180,000,000 in Convertible Debentures and
Exchangeable Debentures, for aggregate net proceeds of $349,482,000, and
the private placement of 500,000 shares of common stock of the Company to
executive officers of AHC.
2. SIGNIFICANT ACCOUNTING POLICIES
The Company's significant accounting policies are as follows:
Basis of Presentation--The accompanying financial statements, include the
accounts of the Company and the OP on a consolidated basis. All significant
intercompany transactions and balances have been eliminated in the
consolidated presentation.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Minority Interests--Included in minority interest for the years ended
December 31, 1996, 1995 and 1994 is the 26.3%, 8.0% and 7.5% interests,
respectively, in the results of the OP which are owned by the Predecessor
Affiliates and others. At December 31, 1996, 1995 and 1994, 4,286,456,
1,069,576 and 1,021,233 OP Units were held by the minority limited
partners, respectively.
In addition, adjustments have been made to minority interest in the OP.
During 1996 and 1995, adjustments of $31,509,000 and $199,000 were
recorded, principally, as a result of the issuance of additional OP Units
in connection with the Development Properties, and the conversion of OP
Units into common stock. During 1994, adjustments of $305,000 resulted
from the issuance of additional OP Units in connection with the acquisition
of two of the four properties acquired during 1994 (see Note 3) and the
additional shares of common stock issued in connection with the conversions
of convertible debentures (see Note 5).
26
<PAGE>
The OP Units are exchangeable, subject to maintaining the Company's status
as a REIT, on a one-for-one basis for shares of the Company's common stock
or for cash, at the option of the Company.
Minority interest also includes the limited partners' share of equity in
two Predecessor Affiliates. The two properties in which the OP has a
general partner interest are Kenneth Hahn Plaza (75% interest) and Vermont-
Slauson Shopping Center (34% interest). Consolidation accounting is
applied to both of the above partnerships as the OP is deemed to have
significant control over the operations of the properties.
Rental Properties--Rental properties are stated at cost less accumulated
depreciation. Costs incurred for the acquisition, renovation and
betterment of the properties are capitalized. Maintenance and repairs are
charged to income as incurred. Costs incurred during the initial leasing
period of a property (primarily representing interest, property taxes, and
unrecoverable operating costs) are also capitalized as buildings and
improvements. The initial leasing period is generally defined as that
period beginning when basic construction of the building is complete and
ending when substantially all tenant improvements and additional
construction costs have been incurred; however, such initial leasing period
cannot exceed one year.
The Company regularly reviews long-lived assets and intangible assets for
impairment whenever events or changes in circumstances indicate that the
carrying amount of the asset may not be recoverable. If the sum of
expected future cash flow is less than the carrying amount of the asset,
the Company recognizes an impairment loss.
Interest costs incurred with respect to qualified expenditures relating to
the construction of assets are capitalized during the construction period.
Interest capitalized during the years ended December 31, 1996, 1995 and
1994 amounted to $400,000, $1,112,000 and $188,000 respectively. Cash paid
for interest, net of capitalized interest costs, was $33,576,000,
$29,116,000 and $21,131,000, for the years ended December 31, 1996, 1995
and 1994, respectively.
Depreciation and Amortization--The cost of buildings and improvements is
depreciated on the straight-line method over estimated useful lives, as
follows:
Buildings - 40 years
Leasehold interests - shorter of lease term or useful life of the
related property
Improvements - shorter of lease term or useful life ranging from 10 to
20 years
During the first quarter of 1996, the Company reviewed the depreciable
lives of its properties. The Company concluded that in order to more
appropriately align the depreciable lives with the economic lives of the
properties the lives should generally be increased to 40 years from
previously utilized lives ranging from 20 to 31.5 years. The net impact of
such change in lives was to reduce the depreciation charge for the year
ended December 31, 1996 by approximately $4,800,000.
Cash and Cash Equivalents--Cash and cash equivalents include readily
marketable securities purchased with original maturities of three months or
less.
Deferred Charges--Deferred charges include deferred leasing costs and loan
fees. Leasing costs include an allocation of the cost of Haagen Property
Management, Inc.'s ("HPMI"), an affiliate, leasing and legal departments
(see Note 11) and third party leasing commissions. Such costs are
amortized on the straight-line basis over the initial lives of the leases,
which range from 5 to 20 years. Deferred financing fees are amortized over
the terms of the respective loans.
27
<PAGE>
Deferred charges are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1996 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Deferred financing costs $15,827 $15,647
Deferred leasing costs 11,203 8,680
------- -------
Total deferred charges 27,030 24,327
Accumulated amortization (8,665) (5,608)
------- -------
Deferred charges, net $18,365 $18,719
======= =======
</TABLE>
Revenue Recognition and Tenant Receivables--Leases with tenants are
accounted for as operating leases. Minimum annual rentals are recognized
on a straight-line basis over the lease term. Unbilled deferred rent
represents the amount by which expected straight-line rental income exceeds
rents currently due under the lease agreement. During the first quarter of
1996 the Company reassessed the recoverability of straight-line contractual
rent increases as a result of the continuing mergers and consolidations
within the retail industry and the financial difficulties of certain
retailers. Accordingly, during the first quarter the Company recorded a
non-recurring non-cash charge of $6.9 million to increase the reserve
against the receivable for straight-line rents. Additionally, the Company
has fully reserved against unbilled deferred rents accruing during 1996.
The Company believes this to be an appropriate and conservative approach to
account for future contractual rent increases in the current retail
environment. The impact of this was a reduction in revenues recognized in
1996 of approximately $1.3 million. Total rents receivable consist of the
following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1996 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Billed tenant receivables $ 5,422 $ 4,140
Allowance for uncollectible rent (1,617) (1,607)
------- -------
Net billed tenant receivables 3,805 2,533
------- -------
Unbilled deferred rent 8,189 11,080
Allowance for unbilled deferred rent (6,007) (1,997)
------- -------
Net unbilled deferred rent 2,182 9,083
------- -------
Tenants receivable, net $ 5,987 $11,616
======= =======
</TABLE>
Included in billed tenant receivables are (1) additional rentals based on
common area maintenance expenses and certain other expenses which are
accrued in the period in which the related expense is incurred and (2)
percentage rents which are accrued on the basis of reported tenant sales.
Other Income--In connection with the development of the Media City Center,
(Burbank, CA), commitments in the form of notes receivable (terminating in
2016) were received from the Community Redevelopment Agency of the City of
Burbank (the "Burbank Agency") aggregating $51,500,000 (plus interest,
subject to certain reductions, as defined). Such commitments are repayable
by the Burbank Agency out of incremental sales and property taxes
associated with certain defined parcels within the property. Management
considers amounts receivable under these notes to be contingent in nature
and accordingly has not recorded the notes receivable. Other income has
been recorded with respect to these
28
<PAGE>
commitments generally in proportion to the recording of property tax
expense. Included in other income in connection with such commitments for
the years ended December 31, 1996, 1995 and 1994 is $2,797,000, $2,756,000,
and $2,262,000, respectively. At December 31, 1996 and 1995, $2,182,000
and $1,690,000 was recorded as other receivables with respect to such
commitments from the Burbank Agency.
Under similar commitments from the Community Redevelopment Agencies of the
Cities of Fullerton and Chino, other income was recognized for the years
ended December 31, 1996, 1995 and 1994 from Fullerton Town Center of
$57,000, $59,000 and $79,000 respectively, and Country Fair Shopping Center
of $146,000, $122,000 and $92,000, respectively.
Income Taxes--The Company has elected to be taxed as a REIT under the
Internal Revenue Code of 1986, as amended (the "Code"), commencing with the
taxable year ended December 31, 1993. As a result, the Company generally
will not be subject to federal and state income taxation at the corporate
level to the extent it distributes annually at least 95% of its REIT
taxable income, as defined in the Code, to its stockholders and satisfies
certain other requirements. Accordingly, no provision has been made for
federal and state income taxes in the accompanying consolidated financial
statements.
As of December 31, 1996, the tax basis of certain net assets of the Company
was approximately $65,000,000 less than the book basis of such assets.
Income (Loss) Per Share--Income (Loss) per share for the years ended
December 31, 1996, 1995 and 1994 were computed based on the weighted
average number of shares outstanding of 12,024,097, 11,964,253 and
11,677,562, respectively. Fully diluted Income (Loss) per share are not
presented since the Convertible Debentures and Exchangeable Debentures and
the effect of options are anti-dilutive.
Accounting Pronouncements--In October 1995, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards (SFAS)
No. 123, "Accounting for Stock-Based Compensation," which is effective for
the Company beginning January 1, 1996. SFAS No. 123 requires expanded
disclosure of stock-based compensation arrangements with employees and
allows for compensation cost to be measured either based on the fair market
value of the equity instrument awarded or under APB 25, which recognizes
compensation cost based on the intrinsic value of the equity instrument
awarded. The Company will continue to apply APB Opinion No. 25 to its
stock based compensation awards to employees and will disclose the required
pro forma effect on net income and earnings per share.
Reclassifications--Certain reclassifications have been made in the 1995 and
1994 financial statements to conform to the classification in the 1996
financial statements.
3. RENTAL PROPERTIES
Rental properties consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1996 1995
------------ ---------
<S> <C> <C>
(IN THOUSANDS)
Land $115,776 $116,966
Leasehold interests 23,038 22,856
Site improvements 47,299 47,268
Buildings and improvements 470,364 465,104
Construction in process 3,088 864
-------- --------
Rental Properties, at cost $659,565 $653,058
======== ========
</TABLE>
29
<PAGE>
4. SECURED DEBT
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Secured Line of Credit $ 41,200 $ 17,200
Notes payable to life insurance companies - interest only and interest
plus principal; variable rates ranging from 7.5% to 10.45%;
maturing April 1999 through September 2004; non-recourse 61,045 61,787
Notes payable to financial institution -- principal and interest paid
monthly, at a weighted average rate of 8.98%; maturing in 2005
and 2010; non-recourse 56,380 56,702
Notes payable to pension funds - principal and interest paid monthly
at 10.90% and 11.45%; maturing October 2006; non-recourse 41,853 45,637
Floating rate tax-exempt certificates of participation - interest only at
effective rate of 5.30%; maturing December 2014 through
December 2015; non-recourse 36,000 36,000
Community Facilities District Special Tax Bonds - interest rates
ranging from 6.0% to 8.5%; maturing in gradually increasing
installments from April 1997 through April 2021; non-recourse 6,163 6,198
-------- --------
$242,641 $223,524
======== ========
</TABLE>
In December, 1996, the OP amended its existing secured revolving line of
credit from a financial institution (the "Credit Facility") to increase the
maximum borrowing limit to $90,000,000. The Credit Facility expires in May
1998 and borrowings under the Credit Facility bear interest at a floating
rate equal to 1.5% over the London Inter-Bank Offering Rate (7.0% at
December 31, 1996). Borrowings under the Credit Facility are secured by
first mortgage liens on Montebello Town Square, The City Center and Media
City Center. The OP also provided as additional security a negative pledge
on all unencumbered properties owned by the OP or its subsidiaries at any
time during the term of the Credit Facility. Subsequent to December 31,
1996, the Company drew an additional $5,500,000 in borrowings against the
Credit Facility. Additionally, the Company has utilized $6,560,000 of the
Credit Facility to provide various letters of credit. The Credit Facility
is subject to certain conditions, the violation of which may affect its
terms.
The notes payable are secured by deeds of trust and the assignment of rents
and leases associated with the related properties. Certain of the non-
recourse notes payable are subject to certain conditions, the violation of
which may result in additional recourse being available to the lenders.
Certain of the loans are subject to substantial prepayment penalties, as
defined in the respective loan agreements -- See Note 10, Fair Value
Disclosure of Financial Instruments.
The $6,163,000 Community Facilities District Special Tax Bonds were issued
by the City of Fontana, California, to finance the construction of the
infrastructure for Empire Center. Debt service is provided through a
special tax assessment on the parcels of land within the development. As
the amount of the liability is fixed and determinable and the related
assets are subject to a lien, the liability and corresponding site
improvement assets have been reflected in the financial statements.
30
<PAGE>
Aggregate future principal payments as of December 31, 1996 are as follows:
<TABLE>
<CAPTION>
YEARS ENDING (IN THOUSANDS)
DECEMBER 31,
- -------------------
<S> <C>
1997 $ 2,458
1998 43,920
1999 28,108
2000 2,813
2001 3,127
Thereafter 162,215
--------
Total $242,641
========
</TABLE>
1998 principal payments, include $41,200,000 maturing on the revolving line
of credit.
Restricted cash at December 31, 1996 and 1995 represents reserve funds
established in connection with the tax exempt financing. Interest income on
such funds accrues to the benefit of the Company. Restricted cash
disbursements require the approval of the trustees of the respective
obligations.
5. SUBORDINATED DEBENTURES
In conjunction with the IPO, the Company issued $150,000,000 in 7 1/2%
Convertible Subordinated Debentures, Series A and B which mature on January
15, 2001. The Convertible Debentures are convertible at any time after
issuance and prior to maturity, into shares of Common Stock of the Company
at a conversion price of $18.00 per share, subject to adjustment under
certain conditions. The Convertible Debentures are not redeemable by the
Company prior to maturity, except for certain reasons primarily intended to
protect the Company's status as a REIT. Interest on the Convertible
Debentures is payable semi-annually in arrears on January 15 and July 15.
The Convertible Debentures are unsecured general obligations of the
Company, subordinate to all existing and future senior indebtedness of the
Company, as defined. The Convertible Debentures are effectively
subordinated to all indebtedness of the OP.
Concurrently, the OP issued $30,000,000 in 7 1/4% Exchangeable Subordinated
Debentures which mature on December 27, 2003 and are secured by one of the
Company's Properties. The Exchangeable Debentures are exchangeable at any
time for Common Stock of the Company at an exchange price of $18.00 per
share, except for certain reasons, primarily intended to protect the
Company's status as a REIT. Interest on the Exchangeable Debentures is
payable semi-annually in arrears on June 27 and December 27.
The Exchangeable Debentures are redeemable by the OP at any time on or
after December 27, 1998, at the option of the Company, at 100% of the
principal amount thereof, together with accrued interest. The Exchangeable
Debentures may be put to the OP for cash in the principal amount thereof
together with accrued interest at the election of the holders at any time
on or after December 27, 2000.
During the year ended December 31, 1995, approximately $1,000,000, of the
Convertible Debentures were converted by the holders into 55,555 shares of
Common Stock of the Company. No conversions were made in 1996.
6. OTHER LIABILITIES
Under the terms of the ground lease with respect to Media City Center with
the Burbank Agency, the Company is obligated to pay fixed base rent of
$1,000 per year. The Burbank Agency was originally entitled to receive
certain net cash flows from operations and certain net proceeds upon any
future sale or transfer of the Property. However, in November 1994 the
Company and the Burbank Agency entered into agreements, which (i)
terminated the Burbank Agency's rights to participate in net cash flows and
net sales
31
<PAGE>
or financing proceeds from Media City Center, (ii) eliminated the Burbank
Agency's consent rights with respect to encumbrances on the property, and
(iii) changed the zoning restrictions on two adjacent parcels to permit
retail development on these parcels. In consideration, the Operating
Partnership paid $5.0 million to the Burbank Agency in April 1996. The two
adjacent parcels were previously owned by a Predecessor Affiliate, which
contributed its rights to such parcels to the Company without remuneration.
7. STOCKHOLDERS' EQUITY
In addition to Common Stock, the Company's Charter authorizes the issuance
of 5,000,000 shares of Preferred Stock, par value $.01 per share. No such
shares were issued or outstanding as of December 31, 1996.
During the years ended December 31, 1996, 1995 and 1994, the Company
declared four quarterly distributions of $0.36 per share/unit.
During the year ended December 31, 1994, the Company recorded final
adjustments in connection with the IPO totaling $1,742,000 which were
charged to additional paid-in-capital. Such amount represents final
adjustments to the values of certain assets and liabilities contributed by
the Predecessor Affiliates.
8. STOCK OPTION PLAN
On December 10, 1993, the Company established a stock option and incentive
plan (the "Option Plan") to enable executive officers, key employees and
directors of the Company, the OP and HPMI to participate in the ownership
of the Company. The Option Plan provides for the award of a broad variety
of stock-based compensation alternatives such as non-qualified stock
options, incentive stock options, and restricted stock, and provides for
the grant to Independent Directors and directors of HPMI of non-qualified
stock options. Options are granted at prices which are not less than market
at date of grant, expire ten years from the date of grant, and are
exercisable 25% per year over four years. The Option Plan is administered
by the Compensation Committee of the Board of Directors which is authorized
to determine the number of shares to be subject thereto and the terms and
conditions thereof. Pursuant to the Option Plan, 850,000 shares of Common
Stock were reserved for issuance to eligible participants.
Following is a summary of the option activity for the three years ended
December 31, 1996:
<TABLE>
<CAPTION>
SHARES UNDER WEIGHTED AVERAGE
OPTION EXERCISE PRICE
------------- ----------------
<S> <C> <C>
January 1, 1994 330,000 $18.00
Granted in 1994 55,000 $13.364
Cancelled (10) $11.625
-------
December 31, 1994 384,990
Granted in 1995 318,500 $12.734
Cancelled (12,844) $14.948
-------
December 31, 1995 690,646
Granted in 1996 5,000 $12.25
Exercised (336) $11.666
Cancelled (91,042) $15.725
------
December 31, 1996 604,268
=======
</TABLE>
As of December 31, 1996, 1995 and 1994 options exercisable totaled
297,449, 176,289 and 82,500, respectively.
32
<PAGE>
The following table summarizes information about stock options outstanding
at December 31, 1996.
<TABLE>
<CAPTION>
Range of Number Weighted Number
Exercise Outstanding Average Remaining Exercisable
Prices at 12/31/96 Contractual Life as of 12/31/96
-------- ----------- ----------------- --------------
<S> <C> <C> <C>
$11.625 239,531 8.56 66,112
$11.750 13,670 8.34 3,520
$12.250 5,000 9.00 0
$15.875 1,067 8.00 317
$18.000 345,000 7.20 227,500
------- ---- -------
604,268 7.78 297,449
======= ==== =======
</TABLE>
The weighted average fair value of the stock options granted
during 1996 and 1995 were $12.25 and $11.75, respectively. The
Company applies Accounting Principles Board Opinion No. 25 and
related Interpretations in accounting for its stock option and
incentive plan. Accordingly, no compensation cost has been
recognized. Had compensation cost for the Company's Option Plan
been determined based on the fair value at the grant dates for
awards under the plan consistent with the method of FASB Statement
123, the Company's net loss and loss per share for the years ended
December 31, 1996 and 1995 would have been increased to the pro
forma amounts indicated below:
<TABLE>
<CAPTION>
1996 1995
------ ------
(In thousands except per share amounts)
<S> <C> <C>
Net loss
As reported $(2,005) $(2,408)
Pro forma $(2,063) $(2,436)
Net loss per share
As reported $ (0.17) $ (0.20)
Pro forma $ (0.17) $ (0.20)
</TABLE>
The fair value of options granted under the Company's Option Plan was
estimated on the date of grant using the Black-Scholes option-pricing model
with the following weighted-average assumptions used: expected life of five
years; risk free interest rate of 6.13%; expected dividend yield of 9%; and
expected volatility of 21.01%.
9. FUTURE MINIMUM RENT
The Company has operating leases with tenants that expire at various dates
through 2037 and are either subject to scheduled fixed increases or
adjustments based on the Consumer Price Index. Generally, the leases grant
tenants renewal options and provide certain potential allowances during the
initial lease-up period. Leases also provide for additional or contingent
rents based on certain operating expenses as well as tenants sales volume.
Future minimum rent under operating leases on a cash basis, excluding
tenant reimbursements of certain costs, as of December 31, 1996 is
summarized as follows:
33
<PAGE>
<TABLE>
<CAPTION>
YEARS ENDING (IN THOUSANDS)
DECEMBER 31,
------------
<S> <C>
1997 $ 61,595
1998 60,521
1999 57,046
2000 54,253
2001 50,741
Thereafter 415,615
--------
Total $699,771
========
</TABLE>
The majority of the Properties are located in Southern California. The
ability of the tenants to honor the terms of their respective leases is
dependent upon the economic, regulatory and social factors affecting the
communities and industries in which the tenants operate.
10. FAIR VALUE DISCLOSURE OF FINANCIAL INSTRUMENTS
The following disclosure of estimated fair value was determined by the
Company using available market information and appropriate valuation
methodologies. However, considerable judgment is necessary to interpret
market data and develop the related estimates of fair value. Accordingly,
the estimates presented herein are not necessarily indicative of the
amounts that could be realized upon disposition of the financial
instruments. The use of different market assumptions and/or estimation
methodologies may have a material effect on the estimated fair value
amounts.
Billed tenant and other receivables, accounts payable and other liabilities
are carried at amounts which reasonably approximate their fair value. The
fair value of unbilled deferred rent is not determinable. It is not
practical to determine the fair value of the Community Facilities District
Special Tax Bonds as such amounts are subject to various government
regulations and restrictions.
The fixed rate mortgage notes payable totaling $159,278,000 and
$164,126,000 as of December 31, 1996 and 1995, respectively, have fair
values of $168,865,000 and $179,112,000, respectively (excluding prepayment
penalties) as estimated based upon interest rates available for the
issuance of debt with similar terms and remaining maturities. These notes
were subject to estimated prepayment penalties of $23,281,000 and
$29,603,000 at December 31, 1996 and 1995, respectively, which would be
required to retire these notes prior to maturity. The carrying value of
floating rate tax-exempt certificates of participation of $36,000,000 at
December 31, 1996 and 1995 approximates their fair value. The fair market
values of the Convertible Debentures at December 31, 1996 and 1995 were
$128,900,000 and $115,730,000, respectively, based on the trading price of
the Series A Convertible Debentures as of December 31, 1996 and 1995. The
fair value of the Exchangeable Debentures at December 31, 1996 and 1995
approximates their carrying value.
The fair value estimates presented herein are based on information
available to management as of December 31, 1996 and 1995. Although
management is not aware of any factors that would significantly affect the
estimated fair value amounts, such amounts have not been comprehensively
revalued for purposes of these financial statements since that date, and
current estimates of fair value may differ significantly from the amounts
presented herein.
11. RELATED PARTY TRANSACTIONS
Haagen Property Management, Inc. -- In conjunction with the IPO, HPMI
acquired all of the operating assets of AHC and assumed all of the
executive, construction, leasing, legal, and property management functions
pursuant to management agreements between the OP and HPMI. As the OP owns
a 95% economic interest in but does not control HPMI, the investment is
accounted for on an equity basis as an unconsolidated subsidiary. No
dividends were paid by HPMI during the three years ended December 31, 1996.
34
<PAGE>
HPMI additionally provides leasing and property management services to
other properties owned by certain Predecessor Affiliates.
Summary financial information for HPMI is presented as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
1996 1995
-------------- --------------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C>
Cash $ 1,014 $ 815
Other assets 1,235 1,202
Total liabilities (1,595) (1,363)
------- -------
Net equity $ 654 $ 654
======= =======
Company's share of net equity $ 621 $ 621
======= =======
</TABLE>
Included in liabilities of HPMI at December 31, 1996 and 1995 is $1,055,000
and $1,215,000, respectively, payable to the OP, representing reimbursable
expenses and cash, held by HPMI on behalf of the Company.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------------------------------------
1996 1995 1994
-------------- -------------- --------------
(IN THOUSANDS) (IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C>
Revenues $7,768 $7,592 $8,570
Operating expenses 7,768 7,588 8,426
------ ------ ------
Net income for the period $ - $ 4 $ 144
====== ====== ======
Company's share of net income $ - $ 4 $ 137
====== ====== ======
</TABLE>
Revenues include services provided by HPMI to the OP which are summarized
as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------------------------------------
1996 1995 1994
-------------- -------------- --------------
(IN THOUSANDS) (IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C>
Executive and property
management fees $4,067 $3,680 $2,386
Leasing and legal fees 2,508 2,161 2,049
Acquisition and
construction fees 622 1,000 673
------ ------ ------
$7,197 $6,841 $5,108
====== ====== ======
</TABLE>
Management fees are expensed by the OP as incurred. Leasing, legal,
acquisition, and construction fees are capitalized and amortized over the
useful lives of the related leases or assets.
Development Properties - Certain properties had not completed their initial
leasing plans at the date of the Company's initial public offering; Media
City Center, Baldwin Hills Crenshaw Plaza, Empire Center, Montebello Town
Square and The City Center (the "Development Properties"). Pursuant to an
agreement among the Operating Partnership and certain limited partners that
transferred the Development Properties to the Operating Partnership such OP
limited partners had the right to receive additional partnership units in
the Operating Partnership ("OP Units") based upon the increase in net
annualized cash flow from the Development Properties between October 31,
1993 and the expiration of the applicable lease-up period for each
development property. The increase in net annualized cash flow was based
on leases signed by March 31 with the tenant open and paying rent by June
30 of the respective lease-up periods.
35
<PAGE>
The lease-up period for Montebello Town Square and The City Center expired
on March 31, 1995 and resulted in the issuance of an additional 113,506 OP
Units to the OP Limited Partners. In connection with this issuance of
additional OP Units, all of the leases were executed by March 31, 1995,
with tenants paying rent by June 30, 1995, including certain leases where
tenants were not open by June 30, 1995. The independent directors
determined that it was appropriate to issue additional OP Units for all of
these leases.
The lease-up period for Media City Center, Baldwin Hills Crenshaw Plaza and
Empire Center expired on March 31, 1996. In connection with the completion
of construction at Empire Center, certain improvements constructed during
the lease-up period were not leased as of March 31, 1996. The independent
directors determined that, the cost of construction of such improvements
should be borne by the Company for purposes of calculating the issuance of
additional OP Units for Empire Center and no OP Units would be issuable to
the Predecessor Affiliates in connection with such unleased improvements.
During the year ended December 31, 1995, the opening of approximately
38,000 square feet of retail and restaurant space at Media City Center,
principally comprising a 30,000 square foot Virgin Megastore, and the
57,000 square foot Sony/Magic Johnson Theatres at Baldwin Hills Crenshaw
Plaza, represented expansion of the Development Properties not contemplated
at the IPO and therefore no additional OP Units were issued in connection
with such expansions.
On August 12, 1996, the Independent members of the Board of Directors
approved the issuance of 3,242,379 OP Units to the Predecessor Affiliates.
The market capitalization of the OP was thereby increased by $41.7 million
based upon the stock price as of August 12, 1996. The Predecessor
Affiliates' interest in the OP was thereby increased from 8.0% to
approximately 26.3% effective July 1, 1996. As a result of the issuance in
the third quarter of the 3,242,379 OP Units, minority interest was
increased and additional paid-in capital decreased by approximately
$31,509,000. The issuance of such additional OP Units in the third quarter
of 1996 did not have a dilutive effect on net income per share. The number
of OP Units issued and outstanding as of December 31, 1996 was 4,286,456.
12. COMMITMENTS AND CONTINGENCIES
Operating Leases -- The Company leases certain of its Properties under
long-term ground leases which are accounted for as operating leases and
which generally provide for contingent rents based on the Company's
tenants' sales volume and renewal options. Five leases expire between 2001
and 2018 and provide for options to renew for additional periods of 20 to
30 years. Two additional leases expire in 2012 and 2050. Future minimum
rental payments required during noncancelable lease terms as of December
31, 1996 are summarized as follows:
<TABLE>
<CAPTION>
YEARS ENDING (IN THOUSANDS)
DECEMBER 31,
------------
<S> <C>
1997 $ 1,472
1998 1,472
1999 1,472
2000 1,474
2001 1,401
Thereafter 12,472
-------
Total $19,763
=======
</TABLE>
Assuming exercise of all renewal options, aggregate future rental payments
as of December 31, 1996 are $51,211,000. Certain of the Company's ground
leases contain participation features. Participation rents paid in
accordance with such terms were $105,000, $95,000 and $38,000 for the years
ended December 31, 1996, 1995 and 1994, respectively.
Litigation -- The Company is subject to various legal proceedings and
claims that arise in the ordinary course of business. These matters are
generally covered by insurance. While the resolution of these matters
cannot be predicted with certainty, management believes, based on currently
available information,
36
<PAGE>
that the final outcome of such matters will not have a material adverse
effect on the financial position or results of operations of the Company.
13. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
The following table sets forth the selected quarterly financial data for
the Company for the years ended December 31, 1996 and 1995 (in thousands
except per share data):
<TABLE>
<CAPTION>
1996
QUARTER ENDED
---------------------------------------------------
DECEMBER 31 SEPTEMBER 30 JUNE 30 MARCH 31
------------ ------------- -------- ---------
<S> <C> <C> <C> <C>
Total Operating Revenues $23,642 $21,988 $21,211 $20,878
======= ======= ======= =======
Net income (loss) $ (709) $ 1,220 $ 3,116 $(5,632)
======= ======= ======= =======
Net income (loss) per share $ (0.06) $ 0.10 $ 0.26 $ (0.47)
======= ======= ======= =======
<CAPTION>
1995
QUARTER ENDED
--------------------------------------------------
DECEMBER 31 SEPTEMBER 30 JUNE 30 MARCH 31
----------- ------------ ------- --------
<S> <C> <C> <C> <C>
Total Operating Revenues $21,534 $20,299 $20,028 $19,462
======= ======= ======= =======
Net loss $ (597) $ (371) $ (515) $ (925)
======= ======= ======= =======
Net loss per share $ (0.05) $ (0.03) $ (0.04) $ (0.08)
======= ======= ======= =======
</TABLE>
37
<PAGE>
ALEXANDER HAAGEN PROPERTIES, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
EACH OF THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
CHARGED TO
BALANCE AT COSTS AND BALANCE
BEGINNING EXPENSES OR AT END
OF PERIOD RENTAL REVENUE DEDUCTIONS OF PERIOD
---------- -------------- ----------- ---------
<S> <C> <C> <C> <C>
Year Ended December 31, 1996
Allowance for uncollectible rent $1,607 $ 1,607 $(1,597) $1,617
Allowance for unbilled deferred rent 1,997 9,367 (5,357) 6,007
------ ------- ------- ------
$3,604 $10,974 $(6,954) $7,624
====== ======= ======= ======
Year Ended December 31, 1995
Allowance for uncollectible rent $ 327 $ 1,412 $ (132) $1,607
Allowance for unbilled deferred rent 1,954 741 (698) 1,997
------ ------- ------- ------
$2,281 $ 2,153 $ (830) $3,604
====== ======= ======= ======
Year Ended December 31, 1994
Allowance for uncollectible rent $ 14 $ 525 $ (212) $ 327
Allowance for unbilled deferred rent 1,239 715 -- 1,954
------ ------- ------- ------
$1,253 $ 1,240 $ (212) $2,281
====== ======= ======= ======
</TABLE>
38
<PAGE>
ALEXANDER HAAGEN PROPERTIES, INC.
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
<TABLE>
<CAPTION>
COSTS
INITIAL COST CAPITALIZED DECEMBER 31, 1996
----------------------- SUBSEQUENT -------------------------------------------
BUILDINGS TO
AND ACQUISITION/ BUILDING AND ACCUMULATED
DESCRIPTION ENCUMBRANCES(1) LAND IMPROVEMENTS CONSTRUCTION LAND IMPROVEMENTS TOTAL DEPRECIATION NET
- ------------ --------------- -------- ------------ ------------ ---- ------------ ------ ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PROMOTIONAL/POWER CENTERS
- -------------------------
Southern California ($44,220) $ 30,670 $ 76,955 $16,600 $ 30,678 $ 93,547 $124,225 $ (18,480) $105,745
Northern/Central California 0 3,777 9,248 13,096 3,777 22,344 26,121 (5,807) 20,314
Oregon (10,058) 9,167 16,454 1,948 9,167 18,402 27,569 (1,033) 26,536
--------- -------- -------- ------- -------- -------- -------- --------- --------
(54,278) 43,614 102,657 31,644 43,622 134,293 177,915 (25,320) 152,595
--------- -------- -------- ------- -------- -------- -------- --------- --------
NEIGHBORHOOD/COMMUNITY
- ----------------------
SHOPPING CENTERS
----------------
Southern California (67,565) 27,517 83,397 12,515 29,690 93,739 123,429 (25,020) 98,409
Northern/Central California (7,442) 3,739 8,978 100 3,739 9,078 12,817 (550) 12,267
--------- -------- -------- ------- -------- -------- -------- --------- --------
(75,007) 31,256 92,375 12,615 33,429 102,817 136,246 (25,570) 110,676
--------- -------- -------- ------- -------- -------- -------- --------- --------
SINGLE TENANT FACILITIES
- ------------------------
Southern California (27,852) 7,721 24,791 1,509 8,121 25,900 34,021 (6,622) 27,399
Northern/Central California (7,956) 2,501 10,002 - 2,501 10,002 12,503 (1,842) 10,661
Arizona (6,348) 4,261 13,934 581 4,261 14,515 18,776 (3,557) 15,219
--------- -------- -------- ------- -------- -------- -------- --------- --------
(42,156) 14,483 48,727 2,090 14,883 50,417 65,300 (12,021) 53,279
--------- -------- -------- ------- -------- -------- -------- --------- --------
REGIONAL MALLS
- --------------
Southern California (30,000) 23,842 203,623 52,639 23,842 256,262 280,104 (41,419) 238,685
--------- -------- -------- ------- -------- -------- -------- --------- --------
($201,441) $113,195 $447,382 $98,988 $115,776 $543,789 $659,565 $(104,330) $555,235
========= ======== ======== ======= ======== ======== ========= ========= ========
</TABLE>
- --------------------
(1) Excludes the secured line of credit of $41,200,000 at December 31, 1996
which is secured by properties included in Regional Malls and
Promotional/Power Centers located in Southern California and Northern
California.
39
<PAGE>
The Company anticipates investing approximately $33,000,000 in capital
expenditures and tenant improvements over the next eighteen months. The
aggregate gross cost of property included above for federal income tax purposes
approximated $618,000,000 as of December 31, 1996.
The following table reconciles the Historical Cost of Properties from January 1,
1994 to December 31, 1996:
<TABLE>
<CAPTION>
1996 1995 1994
--------- -------- ---------
<S> <C> <C> <C>
Balance at beginning of period $653,058 $618,427 $553,414
Additions during period -
Acquisition of properties - - 56,340
Construction and Development Costs 13,950 34,631 8,705
Deductions during period -
Cost of real estate sold (5,080) - (32)
Cost of building demolished (2,363) - -
-------- -------- --------
Balance at close of period $659,565 $653,058 $618,427
======== ======== ========
</TABLE>
The following table reconciles the Accumulated Depreciation from January 1, 1994
to December 31, 1996:
<TABLE>
<CAPTION>
1996 1995 1994
--------- ------- --------
<S> <C> <C> <C>
Balance at beginning of period $ 90,478 $71,047 $52,672
Additions during period -
Depreciation for the year 15,937 19,431 18,394
Deductions during period -
Property sold (1,213) - (19)
Property demolished (872) - -
-------- ------- -------
Balance at close of period $104,330 $90,478 $71,047
======== ======= =======
</TABLE>
40
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information called for by this Item 10 is incorporated herein by
reference to the information included under the captions "Election of Directors"
and "Executive Officers" in the Company's definitive Proxy Statement for the
1995 Annual Meeting of Stockholders (the "Proxy Statement").
ITEM 11. EXECUTIVE COMPENSATION
The information called for by this Item 11 is incorporated herein by
reference to the information included under the caption "Executive Compensation"
in the Company's Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information called for by this Item 12 is incorporated herein by
reference to the information included under the caption "Security Ownership of
Certain Beneficial Owners and Management" in the Company's Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information called for by this Item 13 is incorporated herein by
reference to the information included under the caption "Certain Relationships
and Related Transactions" in the Company's Proxy Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
A. The following documents are filed as part of this report:
<TABLE>
<CAPTION>
NUMBER
------
<S> <C>
1. Independent Auditors' Report......................................................... 21
Consolidated Balance Sheets as of December 31, 1996 and 1995......................... 22
Consolidated Statements of Operations for Each of the Three Years in the Period Ended
December 31, 1996.................................................................... 23
Consolidated Statements of Stockholders' Equity for Each of the Three Years in the
Period Ended December 31, 1996....................................................... 24
Consolidated Statements of Cash Flows for Each of the Three Years in the Period Ended
December 31, 1996.................................................................... 25
Notes to Consolidated Financial Statements........................................... 26
</TABLE>
41
<PAGE>
<TABLE>
<S> <C>
2. Financial Statement Schedules:
II. Valuation and Qualifying Accounts............................................. 38
III. Real Estate and Accumulated Depreciation...................................... 39
</TABLE>
Schedules other than those listed above are omitted because they are not
applicable, not required, or the information required to be set forth
therein is included in the financial statements or the notes thereto.
3. Exhibits:
The following exhibits are included as part of this Annual Report on
Form 10-K as required by Item 601 of Regulation S-K. The exhibits
identified by asterisks are the management contracts and compensatory
plans or arrangements required to be filed as exhibits to this Annual
Report on Form 10-K.
Exhibit 3.1 Amended and Restated Charter of Alexander Haagen
Properties, Inc., incorporated herein by reference to
Exhibit 3.1 to the Company's Form 10-K for the year ended
December 31, 1993 (the "1993 Form 10-K").
Exhibit 3.2 Amended and Restated Bylaws of Alexander Haagen
Properties, Inc. as amended August 12, 1996.
Exhibit 3.2a First Amendment to Amended and Restated Bylaws of
Alexander Haagen Properties, Inc., dated as of August
12,1996.
Exhibit 4.1 Indenture, dated as of December 27, 1993, between
Alexander Haagen Properties, Inc. and The First National
Bank of Boston as Trustee with respect to the 7 1/2%
Convertible Subordinated Debentures due 2001, Series A,
incorporated herein by reference to Exhibit 4.1 to the
1993 Form 10-K.
Exhibit 4.2 Specimen 7 1/2% Convertible Subordinated Debenture due
2001, Series A, incorporated herein by reference to
Exhibit 4.2 to the 1993 Form 10-K.
Exhibit 4.3 Fiscal Agency Agreement, dated as of December 27, 1993,
between Alexander Haagen Properties, Inc. and The First
National Bank of Boston as Fiscal Agent with respect to
the 7 1/2% Convertible Subordinated Debentures due 2001,
Series B, incorporated herein by reference to Exhibit 4.3
to the 1993 Form 10-K.
Exhibit 4.4 Form of 7 1/2% Convertible Subordinated Debentures due
2001, Series B, incorporated herein by reference to
Exhibit 4.4 to the 1993 Form 10-K.
Exhibit 4.5 Specimen Common Stock Certificate, incorporated herein by
reference to Exhibit 4.5 to the 1993 Form 10-K.
Exhibit 4.6 Form of 7 1/4% Exchangeable Subordinated Debentures due
2003 of Alexander Haagen Properties, L.P., incorporated
herein by reference to Exhibit 4.6 to the 1993 Form 10-K.
Exhibit 10.1 Agreement of Limited Partnership of Alexander Haagen
Properties Operating Partnership, L.P., dated as of
December 27, 1993, incorporated herein by reference to
Exhibit 10.1 to the 1993 Form 10-K.
Exhibit 10.2 Amendment No. 1 to the Agreement of Limited Partnership
of Alexander Haagen Properties Operating Partnership,
L.P., dated as of January 1, 1994, incorporated herein by
reference to Exhibit 10.2 to the Company's Form 10-K for
the year ended December 31, 1994 (the "1994 10-K").
42
<PAGE>
Exhibit 10.3 Registration Rights Agreement, dated as of December 27,
1993, among Alexander Haagen Properties, Inc. and the
persons named therein, incorporated herein by reference
to Exhibit 10.2 to the Company's Registration Statement
on Form S-11 (No. 33-70156).
*Exhibit 10.4 Amended and Restated 1993 Stock Option and Incentive Plan
for Officers, Directors and Key Employees of Alexander
Haagen Properties, Inc., Alexander Haagen Properties
Operating Partnership, L.P., and Haagen Property
Management, Inc., incorporated herein by reference to the
Company's 1996 Proxy Statement.
*Exhibit 10.5 401(k) Plan and Trust Agreement of Alexander Haagen
Properties, Inc. and its affiliated and related
companies, incorporated herein by reference to Exhibit
10.4 to the 1993 Form 10-K.
*Exhibit 10.6 Employment Agreement, dated as of December 27, 1993,
among Alexander Haagen Properties, Inc., Haagen Property
Management, Inc. and Alexander Haagen, Sr., incorporated
herein by reference to Exhibit 10.5 to the 1993 Form 10-
K.
*Exhibit 10.7 Employment Agreement, dated as of December 27, 1993,
among Alexander Haagen Properties, Inc., Haagen Property
Management, Inc. and Charlotte Haagen, incorporated
herein by reference to Exhibit 10.6 to the 1993 Form 10-
K.
*Exhibit 10.8 Employment Agreement, dated as of December 27, 1993,
among Alexander Haagen Properties, Inc., Haagen Property
Management, Inc. and Alexander Haagen III, incorporated
herein by reference to Exhibit 10.7 to the 1993 Form 10-
K.
*Exhibit 10.9 Employment Agreement, dated as of December 27, 1993,
among Alexander Haagen Properties, Inc., Haagen Property
Management, Inc. and Fred W. Bruning, incorporated herein
by reference to Exhibit 10.9 to the 1993 Form 10-K.
Exhibit 10.10 Form of Indemnification Agreement between Alexander
Haagen Properties, Inc. and its directors and officers,
incorporated herein by reference to Exhibit 10.4 to the
Company's Registration Statement on Form S-11 (No. 33-
70156).
Exhibit 10.11 Purchase Agreement, dated as of December 27, 1993, among
Alexander Haagen Properties Operating Partnership, L.P.,
Merrill Lynch Global Allocation Fund, Inc., Merrill Lynch
Special Value Fund, Inc., Merrill Lynch Multinational
Investment Portfolios Equity/Convertible Series (Global
Allocation Portfolio), with respect to the 7 1/4%
Exchangeable Subordinated Debentures due 2003,
incorporated herein by reference to Exhibit 10.12 to the
1993 Form 10-K.
Exhibit 10.12 Property Management Agreement, dated as of December 27,
1993, between Haagen Property Management, Inc. and
Alexander Haagen Properties Operating Partnership, L.P.,
incorporated herein by reference to Exhibit 10.13 to the
1993 Form 10-K.
43
<PAGE>
Exhibit 10.13 Agreement for Transfer of Realty and Assets, dated as of
December 27, 1993, by and among Alexander Haagen
Properties Operating Partnership, L.P. and Montebello
Commercial Properties, Haagen GDH Partnership, Center
Partners, H&H Oceanside Co., El Camino North, Baldwin
Hills Associates, Haagen-Burbank Partnership, Date Palm
Partnership, Alexander Haagen III, Betty Haagen, Seymour
Kreshek, Haagen-Fontana Partnership, Lake Forest Shopping
Center, Haagen-San Francisco Partnership, Haagen GDH-2
Partnership, Haagen-Vista Way Associates, and Haagen
Alhambra Associates, incorporated herein by reference to
Exhibit 10.14 to the 1993 Form 10-K.
Exhibit 10.14 Amendment No. 1 to Agreement for Transfer of Realty and
Assets, dated as of December 27, 1993, by and among
Alexander Haagen Properties Operating Partnership, L.P.
and Montebello Commercial Properties, Haagen GDH
Partnership, Center Partners, H&H Oceanside Co., El
Camino North, Baldwin Hills Associates, Haagen-Burbank
Partnership, Date Palm Partnership, Alexander Haagen III,
Betty Haagen, Seymour Kreshek, Haagen-Fontana
Partnership, Lake Forest Shopping Center, Haagen-San
Francisco Partnership, Haagen GDH-2 Partnership, Haagen-
Vista Way Associates, and Haagen Alhambra Associates,
incorporated herein by reference to Exhibit 10.15 to the
1993 Form 10-K.
Exhibit 10.15 Agreement for Transfer of Realty and Assets, dated as of
December 27, 1993, by and among Alexander Haagen
Properties, Inc., Alexander Haagen, Sr. and Charlotte
Haagen, Co-Trustees of the Haagen Living Trust dated
August 17, 1988, Saul S. Kreshek, Saul S. Kreshek and
Seymour Kreshek, Co-Trustees of the Helen Roseman Trust,
Saul S. Kreshek and Seymour Kreshek, Co-Trustees of the
Alex Kreshek Revocable Trust, Jeffrey Harris Kreshek 1992
Irrevocable Trust, Bradley Howard Kreshek 1992
Irrevocable Trust, Howard Andrew Kreshek 1992 Irrevocable
Trust, Haagen-Gardena Gateway Partnership, Haagen-
Hollywood Partnership, San Fernando Mission Partnership,
and Haagen GDH Partnership, incorporated herein by
reference to Exhibit 10.16 to the 1993 Form 10-K.
Exhibit 10.16 Amendment No. 1 to Agreement for Transfer of Realty and
Assets, dated as of December 27, 1993, by and among
Alexander Haagen Properties, Inc., Alexander Haagen, Sr.
and Charlotte Haagen, Co-Trustees of the Haagen Living
Trust dated August 17, 1988, Saul S. Kreshek, Saul S.
Kreshek and Seymour Kreshek, Co-Trustees of the Helen
Roseman Trust, Saul S. Kreshek and Seymour Kreshek, Co-
Trustees of the Alex Kreshek Revocable Trust, Jeffrey
Harris Kreshek 1992 Irrevocable Trust, Bradley Howard
Kreshek 1992 Irrevocable Trust, Howard Andrew Kreshek
1992 Irrevocable Trust, Haagen-Gardena Gateway
Partnership, Haagen-Hollywood Partnership, San Fernando
Mission Partnership, and Haagen GDH Partnership,
incorporated herein by reference to Exhibit 10.17 to the
1993 Form 10-K.
Exhibit 10.17 Partnership Interests Exchange Agreement, dated as of
December 27, 1993, by and among Alexander Haagen
Properties, Inc., Alexander Haagen, Sr. and Charlotte
Haagen, Co-Trustees of the Haagen Living Trust, Seymour
Kreshek and Arline Kreshek, Co-Trustees of the Seymour
and Arline Kreshek Living Trust, and Alexander Haagen
III, incorporated herein by reference to Exhibit 10.18 to
the 1993 Form 10-K.
44
<PAGE>
Exhibit 10.18 Partnership Interests Exchange Agreement between
Willowbrook General Partnership and Alexander Haagen
Operating Partnership, L.P., dated as of December 27,
1993, incorporated herein by reference to Exhibit 10.19
to the 1993 Form 10-K.
Exhibit 10.19 Contribution Agreement, dated as of December 27, 1993,
between Alexander Haagen Properties Operating
Partnership, L.P. and Alexander Haagen Properties, Inc.,
incorporated herein by reference to Exhibit 10.20 to the
1993 Form 10-K.
Exhibit 10.20 Amendment No. 1 to Contribution Agreement between
Alexander Haagen Properties Operating Partnership, L.P.
and Alexander Haagen Properties, Inc., dated as of
December 27, 1993, incorporated herein by reference to
Exhibit 10.21 to the 1993 Form 10-K.
Exhibit 10.21 Option Properties Agreement, dated as of December 27,
1993, among Haagen-Fontana Partnership, Haagen-Alhambra
Retail Partnership and Alexander Haagen Properties
Operating Partnership, L.P., incorporated herein by
reference to Exhibit 10.22 to the 1993 Form 10-K.
Exhibit 10.22 Termination of Option Agreement, dated November 30, 1994,
incorporated herein by reference to Exhibit 10.24 to the
1994 Form 10-K.
Exhibit 10.23 Development Properties Agreement, dated as of December
27, 1993, among Haagen-Burbank Partnership, Haagen-
Fontana Partnership, Baldwin Hills Associates, Montebello
Commercial Properties, Haagen-San Francisco Partnership
and Alexander Haagen Properties Operating Partnership,
L.P., incorporated herein by reference to Exhibit 10.23
to the 1993 Form 10-K.
Exhibit 10.24 Form of Waiver and Recontribution Agreement among
Executive Officers and Alexander Haagen Properties
Operating Partnership, L.P., incorporated herein by
reference to Exhibit 10.16 to the Company's Registration
Statement on Form S-11 (No. 33-70156).
Exhibit 10.25 Form of Indemnity Agreement among Executive Officers and
Alexander Haagen Properties Operating Partnership, L.P.,
incorporated herein by reference to Exhibit 10.17 to the
Company's Registration Statement on Form S-11 (No. 33-
70156).
Exhibit 10.26 Registration Rights Agreement, dated as of December 27,
1993, among Alexander Haagen Properties, Inc., Merrill
Lynch Global Allocation Fund, Inc., Merrill Lynch Special
Value Fund, Inc., and Merrill Lynch Multinational
Investment Portfolios Equity/Convertible Series (Global
Allocation Portfolio), incorporated herein by reference
to Exhibit 10.26 to the 1993 Form 10-K.
Exhibit 10.27 Indemnity Agreement, dated as of December 27, 1993, by
Alexander Haagen Properties Operating Partnership, L.P.
to National Westminster Bank PLC, Capital Markets Branch,
as agent, for the benefit of Merrill Lynch Global
Allocation Fund, Inc., Merrill Lynch Special Value Fund,
Inc., and Merrill Lynch Multinational Investment
Portfolios Equity/Convertible Series (Global Allocation
Portfolio), incorporated herein by reference to Exhibit
10.27 to the 1993 Form 10-K.
Exhibit 10.28 Credit Agreement, dated as of July 10, 1994, by and
between the Company and National Westminster Bank,
incorporated herein by reference to Exhibit 10.30 to the
1994 Form 10-K.
45
<PAGE>
Exhibit 10.29 Loan Agreement, dated as of March 15, 1995, by and
between the Alexander Haagen Properties Finance
Partnership, L.P. and Nomura Asset Capital Corporation,
incorporated herein by reference to Exhibit 10.31 to the
1994 Form 10-K.
Exhibit 10.30 Amended and Restated Credit Agreement dated as of July 8,
1994 as amended and restated as of May 9, 1995 by and
between the Company and National Westminster Bank,
incorporated herein by reference to Exhibit 10.34 to the
Company's 1995 Form 10-K.
Exhibit 10.31 First Amendment to the Amended and Restated Credit
Agreement dated August 25, 1995 among the Company,
National Westminster Bank and Credit Lyonnais,
incorporated herein by reference to Exhibit 10.35 to the
Company's 1995 Form 10-K.
Exhibit 10.32 Second Amendment to the Amended and Restated Credit
Agreement, dated December 11, 1996, among the Company and
National Westminister Bank and Credit Lyonnais.
Exhibit 10.33 First Amendment to the Amended and Restated 1993 Stock
Option and Incentive Plan for Officers, Directors and Key
Employees of Alexander Haagen Properties, Inc. and Haagen
Property Management Inc.
Exhibit 10.34 Second Amendment to Agreement of Limited Partnership of
Alexander Haagen Properties Operating Partnership, L.P.,
dated as of March, 1995.
Exhibit 10.35 Third Amendment to Agreement of Limited Partnership of
Alexander Haagen Properties Operating Partnership, L.P.,
dated as of February 27, 1997.
Exhibit 21.1 Subsidiaries of the Company, incorporated herein by
reference to Exhibit 21.2 to the Company's 1995
Form 10-K.
Exhibit 23.1 Consent of Deloitte & Touche LLP
Exhibit 27 Financial Data Schedule
B. Reports on Form 8-K
There were no Form 8-K reports filed by the Company during the years ended
December 31, 1996, 1995 and 1994.
46
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act
of 1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Manhattan Beach,
State of California, on the 12th day of March, 1997.
ALEXANDER HAAGEN PROPERTIES, INC.
By: /s/ ALEXANDER HAAGEN, SR.
-----------------------------------------
Alexander Haagen, Sr.
Chairman of the Board of Directors,
Chief Executive Officer and President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ ALEXANDER HAAGEN, SR. Chairman of the Board, Chief March 12, 1997
- ------------------------------------- Executive Officer and President
Alexander Haagen, Sr. (Principal Executive Officer)
/s/ R. BRUCE ANDREWS Director March 12, 1997
- -------------------------------------
R. Bruce Andrews
/s/ TOM BRADLEY Director March 12, 1997
- -------------------------------------
Tom Bradley
/s/ FRED W. BRUNING Director, Senior Vice President March 12, 1997
- ------------------------------------- Leasing and Development
Fred W. Bruning
/s/ WARREN D. FIX Director March 12, 1997
- -------------------------------------
Warren D. Fix
/s/ ALEXANDER HAAGEN III Director, Vice Chairman March 12, 1997
- ----------------------------
Alexander Haagen III
/s/ WARNER HEINEMAN Director March 12, 1997
- -----------------------------------------
Warner Heineman
/s/ FRED L. RIEDMAN Director March 12, 1997
- -----------------------------------------
Fred L. Riedman
/s/ STUART GULLAND Senior Vice President--Chief March 12, 1997
- ----------------------------------------- Financial Officer and Treasurer
Stuart Gulland (Principal Financial Officer)
/s/ JAY HUBSCHMAN Corporate Controller March 12, 1997
- ----------------------------------------- (Principal Accounting Officer)
Jay Hubschman
</TABLE>
S-1
<PAGE>
EXHIBIT LIST
<TABLE>
<CAPTION>
EXHIBIT PAGE NUMBER OR
NUMBER DESCRIPTION INCORPORATION BY REFERENCE
- ------ ----------- --------------------------
<C> <S> <C>
3.1 Amended and Restated Charter of Alexander Haagen Incorporated herein by reference to
Properties, Inc. Exhibit 3.1 to the Company's 1993
Form 10-K.
3.2 Amended and Restated Bylaws of Alexander Haagen Incorporated herein by reference to
Properties, Inc. Exhibit 3.2 to the Company's
Registration Statement on Form S-11
(No. 33-70156).
3.2a First Amendment to Amended and Restated Bylaws of
Alexander Haagen Properties, Inc., dated as of
August 12, 1996
4.1 Indenture, dated as of December 27, 1993, between Incorporated herein by reference to
Alexander Haagen Properties, Inc. and The First National Exhibit 4.1 to the Company's 1993
Bank of Boston as Trustee with respect to the 7 1/2% Form 10-K.
Convertible Subordinated Debentures due 2001, Series A.
4.2 Specimen 7 1/2% Convertible Subordinated Debenture due Incorporated herein by reference to
2001, Series A. Exhibit 4.2 to the Company's 1993
Form 10-K.
4.3 Fiscal Agency Agreement, dated as of December 27, Incorporated herein by reference to
1993, between Alexander Haagen Properties, Inc. and Exhibit 4.3 to the Company's 1993
The First National Bank of Boston as Fiscal Agent with Form 10-K.
respect to the 7 1/2% Convertible Subordinated Debentures
due 2001, Series B.
4.4 Form of 7 1/2% Convertible Subordinated Debentures due Incorporated herein by reference to
2001, Series B. Exhibit 4.4 to the Company's 1993
Form 10-K.
4.5 Specimen Common Stock Certificate. Incorporated herein by reference to
Exhibit 4.5 to the Company's 1993
Form 10-K.
4.6 Form of 7 1/4% Exchangeable Subordinated Debentures Incorporated herein by reference to
due 2003 of Alexander Haagen Properties, L.P. Exhibit 4.6 to the Company's 1993
Form 10-K.
10.1 Agreement of Limited Partnership of Alexander Haagen Incorporated herein by reference to
Properties Operating Partnership, L.P., dated as of Exhibit 10.1 to the Company's 1993
December 27, 1993. Form 10-K.
10.2 Amendment No. 1 to the Agreement of Limited Incorporated herein by reference to
Partnership of Alexander Haagen Properties Operating Exhibit 10.2 to the Company's
Partnership, L.P., dated as of January 1, 1994. Form 10-K for the year ended
December 31, 1994 (the "1994 10-K").
</TABLE>
E-1
<PAGE>
<TABLE>
EXHIBIT PAGE NUMBER OR
NUMBER DESCRIPTION INCORPORATION BY REFERENCE
- ------ ----------- --------------------------
<C> <S> <C>
10.3 Registration Rights Agreement, dated as of December 27, Incorporated herein by reference to
1993, among Alexander Haagen Properties, Inc. and the Exhibit 10.2 to the Company's
persons named therein. Registration Statement on Form S-11
(No. 33-70156).
10.4 Amended and Restated 1993 Stock Option and Incentive Incorporated herein by reference to
Plan for Officers, Directors and Key Employees of the
Alexander Haagen Properties, Inc., Alexander Haagen Company's 1996 Proxy Statement.
Properties Operating Partnership, L.P., and Haagen
Property Management, Inc.
10.5 401(k) Plan and Trust Agreement of Alexander Haagen Incorporated herein by reference to
Properties, Inc. and its affiliated and related companies. Exhibit 10.4 to the Company's 1993
Form 10-K.
10.6 Employment Agreement, dated as of December 27, 1993, Incorporated herein by reference to
among Alexander Haagen Properties, Inc., Haagen Exhibit 10.5 to the Company's 1993
Property Management, Inc. and Alexander Haagen, Sr. Form 10-K.
10.7 Employment Agreement, dated as of December 27, 1993, Incorporated herein by reference to
among Alexander Haagen Properties, Inc., Haagen Exhibit 10.6 to the Company's 1993
Property Management, Inc. and Charlotte Haagen. Form 10-K.
10.8 Employment Agreement, dated as of December 27, 1993, Incorporated herein by reference to
among Alexander Haagen Properties, Inc., Haagen Exhibit 10.7 to the Company's 1993
Property Management, Inc. and Alexander Haagen III. Form 10-K.
10.9 Employment Agreement, dated as of December 27, 1993, Incorporated herein by reference to
among Alexander Haagen Properties, Inc., Haagen Exhibit 10.9 to the Company's 1993
Property Management, Inc. and Fred W. Bruning. Form 10-K.
10.10 Form of Indemnification Agreement between Alexander Incorporated herein by reference to
Haagen Properties, Inc. and its directors and officers. Exhibit 10.4 to the Company's
Registration Statement on Form S-11
(No. 33-70156).
10.11 Purchase Agreement, dated as of December 27, 1993, Incorporated herein by reference to
among Alexander Haagen Properties Operating Exhibit 10.12 to the Company's 1993
Partnership, L.P., Merrill Lynch Global Allocation Fund, Form 10-K.
Inc., Merrill Lynch Special Value Fund, Inc., Merrill
Lynch Multinational Investment Portfolios
Equity/Convertible Series (Global Allocation Portfolio),
with respect to the 7 1/4% Exchangeable Subordinated
Debentures due 2003.
10.12 Property Management Agreement, dated as of Incorporated herein by reference to
December 27, 1993, between Haagen Property Exhibit 10.13 to the Company's 1993
Management, Inc. and Alexander Haagen Properties Form 10-K.
Operating Partnership, L.P.
</TABLE>
E-2
<PAGE>
<TABLE>
EXHIBIT PAGE NUMBER OR
NUMBER DESCRIPTION INCORPORATION BY REFERENCE
- ------ ----------- --------------------------
<C> <S> <C>
10.13 Agreement for Transfer of Realty and Assets, dated as of Incorporated herein by reference to
December 27, 1993, by and among Alexander Haagen Exhibit 10.14 to the Company's 1993
Properties Operating Partnership, L.P. and Montebello Form 10-K.
Commercial Properties, Haagen GDH Partnership, Center
Partners, H&H Oceanside Co., El Camino North,
Baldwin Hills Associates, Haagen-Burbank Partnership,
Date Palm Partnership, Alexander Haagen III, Betty
Haagen, Seymour Kreshek, Haagen-Fontana Partnership,
Lake Forest Shopping Center, Haagen-San Francisco
Partnership, Haagen GDH-2 Partnership, Haagen-Vista
Way Associates, and Haagen Alhambra Associates.
10.14 Amendment No. 1 to Agreement for Transfer of Realty Incorporated herein by reference to
and Assets, dated as of December 27, 1993, by and Exhibit 10.15 to the Company's 1993
among Alexander Haagen Properties Operating Form 10-K.
Partnership, L.P. and Montebello Commercial Properties,
Haagen GDH Partnership, Center Partners, H&H
Oceanside Co., El Camino North, Baldwin Hills
Associates, Haagen-Burbank Partnership, Date Palm
Partnership, Alexander Haagen III, Betty Haagen,
Seymour Kreshek, Haagen-Fontana Partnership, Lake
Forest Shopping Center, Haagen-San Francisco
Partnership, Haagen GDH-2 Partnership, Haagen-Vista
Way Associates, and Haagen Alhambra Associates.
10.15 Agreement for Transfer of Realty and Assets, dated as of Incorporated herein by reference to
December 27, 1993, by and among Alexander Haagen Exhibit 10.16 to the Company's 1993
Properties, Inc., Alexander Haagen, Sr. and Charlotte Form 10-K.
Haagen, Co-Trustees of the Haagen Living Trust dated
August 17, 1988, Saul S. Kreshek, Saul S. Kreshek and
Seymour Kreshek, Co-Trustees of the Helen Roseman
Trust, Saul S. Kreshek and Seymour Kreshek, Co-
Trustees of the Alex Kreshek Revocable Trust, Jeffrey
Harris Kreshek 1992 Irrevocable Trust, Bradley Howard
Kreshek 1992 Irrevocable Trust, Howard Andrew
Kreshek 1992 Irrevocable Trust, Haagen-Gardena
Gateway Partnership, Haagen-Hollywood Partnership, San
Fernando Mission Partnership, and Haagen GDH
Partnership.
</TABLE>
E-3
<PAGE>
<TABLE>
EXHIBIT PAGE NUMBER OR
NUMBER DESCRIPTION INCORPORATION BY REFERENCE
- ------ ----------- --------------------------
<C> <S> <C>
10.16 Amendment No. 1 to Agreement for Transfer of Realty Incorporated herein by reference to
and Assets, dated as of December 27, 1993, by and Exhibit 10.17 to the Company's 1993
among Alexander Haagen Properties, Inc., Alexander Form 10-K.
Haagen, Sr. and Charlotte Haagen, Co-Trustees of the
Haagen Living Trust dated August 17, 1988, Saul S.
Kreshek, Saul S. Kreshek and Seymour Kreshek, Co-
Trustees of the Helen Roseman Trust, Saul S. Kreshek
and Seymour Kreshek, Co-Trustees of the Alex Kreshek
Revocable Trust, Jeffrey Harris Kreshek 1992 Irrevocable
Trust, Bradley Howard Kreshek 1992 Irrevocable Trust,
Howard Andrew Kreshek 1992 Irrevocable Trust,
Haagen-Gardena Gateway Partnership, Haagen-Hollywood
Partnership, San Fernando Mission Partnership, and
Haagen GDH Partnership.
10.17 Partnership Interests Exchange Agreement, dated as of Incorporated herein by reference to
December 27, 1993, by and among Alexander Haagen Exhibit 10.18 to the Company's 1993
Properties, Inc., Alexander Haagen, Sr. and Charlotte Form 10-K.
Haagen, Co-Trustees of the Haagen Living Trust,
Seymour Kreshek and Arline Kreshek, Co-Trustees of the
Seymour and Arline Kreshek Living Trust, and Alexander
Haagen III.
10.18 Partnership Interests Exchange Agreement between Incorporated herein by reference to
Willowbrook General Partnership and Alexander Haagen Exhibit 10.19 to the Company's 1993
Operating Partnership, L.P., dated as of December 27, Form 10-K.
1993.
10.19 Contribution Agreement, dated as of December 27, 1993, Incorporated herein by reference to
between Alexander Haagen Properties Operating Exhibit 10.20 to the Company's 1993
Partnership, L.P. and Alexander Haagen Properties, Inc. Form 10-K.
10.20 Amendment No. 1 to Contribution Agreement between Incorporated herein by reference to
Alexander Haagen Properties Operating Partnership, L.P. Exhibit 10.21 to the Company's 1993
and Alexander Haagen Properties, Inc., dated as of Form 10-K.
December 27, 1993.
10.21 Option Properties Agreement, dated as of December 27, Incorporated herein by reference to
1993, among Haagen-Fontana Partnership, Haagen- Exhibit 10.22 to the Company's 1993
Alhambra Retail Partnership and Alexander Haagen Form 10-K.
Properties Operating Partnership, L.P.
10.22 Termination of Option Agreement, dated November 30, Incorporated herein by reference to
1994. Exhibit 10.24 to the Company's 1994
Form 10-K.
10.23 Development Properties Agreement, dated as of Incorporated herein by reference to
December 27, 1993, among Haagen-Burbank Partnership, Exhibit 10.23 to the Company's 1993
Haagen-Fontana Partnership, Baldwin Hills Associates, Form 10-K.
Montebello Commercial Properties, Haagen-San Francisco
Partnership and Alexander Haagen Properties Operating
Partnership, L.P.
</TABLE>
E-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PAGE NUMBER OR
NUMBER DESCRIPTION INCORPORATION BY REFERENCE
- ------ ----------- --------------------------
<C> <S> <C>
10.24 Form of Waiver and Recontribution Agreement among Incorporated herein by reference to
Executive Officers and Alexander Haagen Properties Exhibit 10.16 to the Company's
Operating Partnership, L.P. Registration Statement on Form S-11
(No. 33-70156).
10.25 Form of Indemnity Agreement among Executive Officers Incorporated herein by reference to
and Alexander Haagen Properties Operating Partnership, Exhibit 10.17 to the Company's
L.P. Registration Statement on Form S-11
(No. 33-70156).
10.26 Registration Rights Agreement, dated as of December 27, Incorporated herein by reference to
1993, among Alexander Haagen Properties, Inc. and Exhibit 10.26 to the Company's 1993
Merrill Lynch Global Allocation Fund, Inc., Merrill Form 10-K.
Lynch Special Value Fund, Inc., and Merrill Lynch
Multinational Investment Portfolios Equity/Convertible
Series (Global Allocation Portfolio).
10.27 Indemnity Agreement, dated as of December 27, 1993, by Incorporated herein by reference to
Alexander Haagen Properties Operating Partnership, L.P. Exhibit 10.27 to the Company's 1993
to National Westminster Bank PLC, Capital Markets Form 10-K.
Branch, as agent, for the benefit of Merrill Lynch Global
Allocation Fund, Inc., Merrill Lynch Special Value Fund,
Inc., and Merrill Lynch Multinational Investment
Portfolios Equity/Convertible Series (Global Allocation
Portfolio).
10.28 Credit Agreement, dated as of July 10, 1994, by and Incorporated herein by reference to
between the Company and National Westminster Bank. Exhibit 10.30 to the 1994 Form 10-K.
10.29 Loan Agreement, dated as of March 15, 1995, by and Incorporated herein by reference to
between the Alexander Haagen Properties Finance Exhibit 10.31 to the 1994 Form 10-K.
Partnership, L.P. and Nomura Asset Capital Corporation.
10.30 Amended and Restated Credit Agreement dated as of Incorporated herein by reference Exhibit
July 8, 1994 as amended and restated as of May 9, 1995 10.34 to the Company's 1995 Form 10-K
by and between the Company and National Westminster
Bank.
10.31 First Amendment to the Amended and Restated Credit Incorporated herein by reference to
Agreement dated August 25, 1995 among the Company, Exhibit 10.35 to the Company's 1995
National Westminster Bank and Credit Lyonnais. Form 10-K.
10.32 Second Amendment to the Amended and Restated Credit
Agreement, dated December 11, 1996, among the
Company and National Westminster Bank and Credit
Lyonnais.
</TABLE>
E-5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PAGE NUMBER OR
NUMBER DESCRIPTION INCORPORATION BY REFERENCE
- ------ ----------- --------------------------
<C> <S> <C>
10.33 First Amendment to the Amended and Restated 1993 Stock
Option and Incentive Plan for Officers, Directors and
key employees of Alexander Haagen Properties, Inc. and
Haagen Property Management, Inc.
10.34 Second Amendment to Agreement of Limited Partnership
of Alexander Haagen Properties Operating Partnership,
L.P., dated as of March, 1995.
10.35 Third Amendment to Agreement of Limited Partnership
of Alexander Haagen Properties Operating Partnership,
L.P., dated as of February 27, 1997.
21.1 Subsidiaries of the Company. Incorporated herein by reference to
Exhibit 21.2 to the Company's 1995
Form 10-K.
23.1 Consent of Deloitte & Touche.
27 Financial Data Schedule
</TABLE>
E-6
<PAGE>
EXHIBIT 3.2a
FIRST AMENDED TO AMENDED AND RESTATED
BYLAWS
OF
ALEXANDER HAAGEN PROPERTIES, INC.
As of August 12, 1996, Article III, Section 2 of the Amended and Restated
Bylaws of Alexander Haagen Properties, Inc., shall be amended to read as
follows:
"Section 2. Number and Qualifications. The number of directors shall be
-------------------------
ten, which number may be increased or decreased, but not to less than seven, nor
more than thirteen. The number of directors may be increased or decreased by an
amendment to these Bylaws, provided, however, that the tenure of office of a
director shall not be affected by any decrease in the number of directors. Each
director shall be a stockholder, a citizen of the United States or a resident of
the State of Maryland."
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<PAGE>
EXHIBIT 10.32
SECOND AMENDMENT TO THE AMENDED
AND RESTATED CREDIT AGREEMENT
THIS SECOND AMENDMENT TO THE AMENDED AND RESTATED CREDIT AGREEMENT (this
"Amendment"), dated December 11, 1996, is among ALEXANDER HAAGEN PROPERTIES
--
OPERATING PARTNERSHIP, L.P., a California limited partnership (the "Company"),
-------
NATIONAL WESTMINSTER BANK Plc, NEW YORK BRANCH, a Branch duly licensed under the
laws of the State of New York of a public limited company organized under the
laws of the United Kingdom, as Agent (the "Agent"), and NATIONAL WESTMINSTER
BANK Plc, NEW YORK BRANCH, and the other Lenders listed on Exhibit A to the
Credit Agreement as amended from time to time, (each a "Lender" and,
------
collectively, the "Lenders") and is made with respect to the following facts:
-------
A. The Company and the Agent are parties to the Credit Agreement dated as
of July 8, 1994, as amended and restated May 9, 1995, and the First Amendment to
the Amended and Restated Credit Agreement dated August 31, 1995 (the "Credit
------
Agreement").
- ---------
B. The Company and the Agent now wish to amend the Credit Agreement upon
the terms and conditions set forth in this Amendment and to amend Exhibit A to
the Credit Agreement to add certain other Lenders as parties to the Credit
Agreement. The credit facilities will continue to be secured by mortgages on
certain of the Company's properties and certain other collateral and will be a
full recourse obligation of the Company.
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the Company and the Agent hereby agree
as follows (all capitalized terms not defined in this Amendment shall have the
meanings ascribed to such terms in the Credit Agreement):
I. AMENDMENT TO CREDIT AGREEMENT.
-----------------------------
1. Section 1.1 of the Credit Agreement is hereby amended by replacing the
following definitions to read in their entirety as follows:
"Allocated Amount" means the following amounts with respect to each of
----------------
the Mortgaged Properties: (i) the Montebello Property: $13,420,000; (ii)
the City Center Property: $13,789,300; (iii) the Media City Property:
$62,790,700. The Agent, the Lenders and the Company agree that the
Allocated Amounts have been determined on the basis of the Company's and
the Lender's determination of the relative fair market values of such
properties solely for the purposes of determining (a) the appropriate
amount
<PAGE>
of title insurance coverage to be allocated to each such property and (b)
the maximum Value of Substitute Properties which the Lenders may designate
for substitution of Collateral pursuant to Section 5.5 hereof.
"Negative Pledges" means the Negative Pledge Agreements with respect
----------------
to the Empire Center property, dated July 8, 1994; the Medford Center
property, dated May 9, 1995; the Pomona Gateway Center property, dated July
8, 1994; the Sears Hollywood property, dated July 8, 1994; the Smitty's
Tucson property, dated July 8, 1994; and the Vermont-Slauson Shopping
Center, dated May 9, 1995, as the Negative Pledges may be amended,
modified, or otherwise supplemented, and such other Negative Pledge
Agreements covering additional Unencumbered Properties from time to time as
provided in this Credit Agreement.
2. Section 2.1(b) of the Credit Agreement is hereby amended, in its
entirety, to read as follows:
(b) The Advances made pursuant hereto by the Lenders, together with
any Letter of Credit usage, shall not exceed an aggregate principal amount
outstanding at any one time of $90,000,000 (the "Commitment"). There may
----------
not be more than one Advance made on any day. Within the foregoing limits
and subject to the conditions set out in Article III, the Company may
borrow Advances under this Section 2.1, repay Advances under Section 2.7,
and reborrow Advances.
3. Section 2.6(ii) of the Credit Agreement is hereby amended, in its
entirety, to read as follows:
(ii) at the end of the initial and each subsequent Interest Period for
any Advance, the Company shall be permitted to select an additional
Interest Period for such Advance by delivering a written notice thereof to
the Agent at any time prior to 10:00 a.m. (Los Angeles time) on the third
Business Day prior to the expiration of the then current Interest Period
applicable to such Advance, provided that if no Interest Period selection
is delivered to the Agent by such time, the Company shall be deemed to have
selected an Interest Period of one month and such Interest Period selected
or deemed to have been selected for such Advance may not be changed without
the consent of the Lenders;
4. Section 4.16(a) of the Credit Agreement is hereby amended, in its
entirety, to read as follows:
Section 4.16 Insurance. Notwithstanding anything to the contrary contained
---------
in the Mortgages, the Company shall
-2-
<PAGE>
maintain upon or in connection with each of the Mortgaged Properties:
(a) Property and casualty insurance coverage evidenced by original or
certified copies of insurance policies, binders for such insurance,
together with evidence that the premiums for such policies have been paid
current. Such insurance policies shall insure each of the Mortgaged
Properties for 100% of their full replacement cost (exclusive of footings
and foundations) in so-called "all risk" form and with coverage for
floods, earthquakes and such other hazards (including "collapse" and
"explosion") as the Lenders may require for each of the Mortgaged
Properties and as are consistent with reasonable and customary
requirements in the industry; provided, however, that the Company
acknowledges and agrees that Lenders hereby require that Borrower obtain,
and Borrower shall obtain, insurance policies providing insurance
coverage against damage to any of the Mortgaged Properties by reason of
earthquake in an aggregate amount not less than $40,000,000 (with policy
deductibles of not more than 5% of such coverage). Such insurance policies
shall contain replacement cost and agreed amount endorsements (with no
reduction for depreciation), an endorsement providing Building Ordinance
Coverage and an endorsement covering the costs of demolition and increased
costs of construction due to the enforcement of building codes or
ordinances. If required by any of the Lenders, the Company shall also
furnish insurance providing boiler and machinery comprehensive coverage
for all mechanical and electrical equipment at each of the Mortgaged
Properties insuring against breakdown or explosion of such equipment on a
replacement cost value basis. The property insurance and boiler and
machinery insurance required under this Section 4.16(a) shall include
"underground hazards" coverage; "time element" coverage by which the
Lenders shall be assured payment of all amounts due under the Loan
Documents; "extra expense" (i.e., soft costs) coverage; and "expediting
expense" coverage. The Company shall also furnish business interruption or
loss of rental income insurance in connection with all policies covering
property and boiler and machinery insurance for a period of not less than
one (1) year endorsed, other than with respect to boiler and machinery
insurance, to provide a 180 day extended period of indemnity. All
insurance required under Sections 4.16(a) and 4.16(b) shall be with
---------------- -------
companies and in amounts and with coverage and deductibles satisfactory to
the Lenders, and all insurance required under this Section 4.16(a) shall
---------------
include endorsements naming the Lenders as loss payees, and shall have
endorsed thereon the standard mortgagee clause in favor of the Lenders.
All companies issuing policies required under Sections 4.16(a) and
----------------
-3-
<PAGE>
4.16(b) shall have a current Best Insurance Reports rating no less
-------
favorable than the rating currently held by such companies, and all
such companies shall be licensed to do business in the State of
California; provided, however, that coverage for earthquake damage in
excess of the first $20,000,000 may be obtained from companies not
licensed to do business in the State of California if such companies
maintain a Best Insurance Reports rating of not less than A for ability to
pay claims. All policies required under Sections 4.16(a) and 4.16(b)
---------------- -------
shall provide that (i) the insurance evidenced thereby shall not be
canceled or modified without, in the case of non-payment of premiums, at
least ten (10) days' prior written notice from the insurance carrier to
the Agent, or, in any other circumstance, at least thirty (30) days' prior
written notice from the insurance carrier to the Agent; and (ii) no act or
thing done by the company, General Partner or any Affiliate of any of them
shall invalidate the policy as against the Lenders. The Company shall
deliver renewal certificates of all policies of insurance required under
Sections 4.16(a) and 4.16(b), together with written evidence that the
---------------- -------
premiums are paid current, at least thirty (30) days prior to the
expiration of the then current policy.
5. Section 4.16(b) of the Credit Agreement is hereby deleted and Section
4.16(c) relettered as Section 4.16(b).
6. Section 5.1(h)(ii) of the Credit Agreement is hereby amended, in its
entirety, to read as follows:
(ii) Notwithstanding the foregoing, the Agent shall require
Appraisals of any Mortgaged Property if (x) such Appraisal is required by
applicable law or regulations, or (y) such Appraisal is requested by any
Lender; provided, however, the Company shall not be required to pay for
more than one Appraisal during any twelve (12) month period.
7. The last paragraph of Section 5.3(k) of the Credit Agreement is
hereby amended, in its entirety, to read as follows:
As used herein, the term "material Lease" shall refer to any Lease set
forth on Schedule 4, and any Lease covering 25,000 or more square feet of
net rentable leased premises or Leases aggregating 20,000 or more square
feet of net rentable leased premises at a Mortgaged Property and leased by
a tenant and one or more of its Affiliates. When used in connection with a
material Lease, the term "material change" shall refer to a change in the
term of the Lease, the number of or means of exercising any options to
extend the term of the Lease, the net rentable square footage of the
leased premises, the effective rent under the Lease,
-4-
<PAGE>
any rights of termination under the Lease, or any other similar material
provisions.
8. Section 5.6(a) of the Credit Agreement is hereby amended, in its
entirety, to read as follows:
(a) At any time, the Company may request the release of such Mortgaged
Property and offer one or more Substitute Properties, subject to the
approval of the Lenders, as substitute Collateral therefor, provided that
such substitution will not result in a Default or an Event of Default. In
connection with such request, the Company will provide the Agent with first
priority deed of trust liens, assignments of leases and rents and security
interests in such Substitute Properties as substitute Collateral for the
Advances. All such liens and security interests shall be provided pursuant
to instruments which are substantially identical in form to the Mortgages,
Assignments of Leases and Rents and other Loan Documents affecting the
Mortgaged Properties (as the same may have been or may hereafter be
amended) as of the date hereof, with such changes the Required Lenders may
reasonably require. Upon the provision and acceptance of such substitute
Collateral to Agent, Agent shall release and reconvey the Mortgage and
Assignments of Leases and Rents affecting the released Mortgaged Property
and all of its right, title and interest in any insurance proceeds payable
with respect thereto.
9. Section 5.7 of the Credit Agreement is hereby deleted.
10. Section 7.14 of the Credit Agreement is hereby amended, in its
entirety, to read as follows:
Section 7.14 Unanimous Approvals. No written amendment, supplement,
-------------------
modification or waiver which adds, deletes, changes or waives any
provisions of the Loan Documents shall (i) extend either the Maturity Date
or any installment or required prepayment of any Advances; (ii) reduce the
rate or extend the time of payment of interest on any Advances or Letters
of Credit: (iii) reduce the principal amount of any Advances or Letters of
Credit; (iv) reduce the Fees, or any other fee payable to the Lenders; (v)
change any Lender's Percentage or the amount of any Advance or Letter of
Credit of any Lender (except to the extent permitted by Sections 7.17 and
7.18 hereof); (vii) change any provision of this Section 7.14 or the
definition of Required Lenders; (viii) consent to or permit (if not
expressly permitted under the Loan Documents) the assignment or transfer by
the Company of any of its rights and obligations under any Loan Document,
consent to any merger or consolidation or sale, lease or other disposal of
all or a substantial part of the Company's property or
-5-
<PAGE>
assets, modify any financial covenants, change, amend, modify or release
any negative pledge, waive any Default or Event of Default, or waive or
release any lien on any of the Mortgaged Properties or commence any
judicial or nonjudicial foreclosure proceeding, in each case without the
written consent of the Agent and each Lender; or (ix) amend, modify or
waive any provision of any Loan Document, if the effect thereof is to
affect the rights or duties of Agent, without the written consent of the
then Agent. Any such amendment, supplement, modification or waiver shall
apply to each of the Lenders equally and shall be binding upon the
Company, the Lenders, Agent and all future holders of the Promissory
Notes. In the case of any waiver, the Company, the Lenders and Agent shall
be restored to their former position and rights hereunder and under the
outstanding Promissory Notes, and any Default or Event of Default waived
shall be deemed to be cured and not continuing, but no such waiver shall
extend to any subsequent or other Default or Event of Default, or impair
any right consequent thereon.
11. Exhibit A to the Credit Agreement is hereby deleted in its entirety
and replaced with Exhibit A which is attached as Appendix I to this Amendment.
12. Schedule 8 to the Credit Agreement is hereby deleted in its entirety
and replaced with Schedule 8 which is attached as Appendix II to this Amendment.
II. CONDITIONS PRECEDENT.
--------------------
On or prior to the date of execution of this Amendment, the Agent shall
have received the following, in form and substance satisfactory to the Agent:
1. An officer's certificate;
2. Duly executed and completed Promissory Notes payable to the order of
each Lender;
3. An opinion of senior counsel to the Company, addressed to the Agent,
the Lenders and the Issuing Bank;
4. Current Appraisals for each of the Mortgaged Properties;
5. Amendments to the Mortgage and Assignment of Leases and Rents for
each of the Mortgaged Properties, delivered in recordable form, and evidence of
the recording of each such instrument as may be necessary or, in the opinion of
the Agent,
-6-
<PAGE>
<PAGE>
desirable to perfect and protect the liens, encumbrances, interests or rights
purported to be created or amended thereby;
6. With respect to each of the Mortgaged Properties, (i) a mortgagee's
policy of title insurance issued by Chicago Title Insurance Company or such
other reputable national title insurance company reasonably acceptable to the
Agent, in form and substance satisfactory to the Agent, with such endorsements
and affirmative coverage as the Agent may reasonably request (to the extent
available under applicable law) and with such reinsurance (with direct access
provisions) as the Agent may request, (x) insuring the Agent, the Lenders and
the Issuing Bank, in an amount equal to the Allocated Amount with respect to
such property, that each amendment to the Mortgage constitutes a valid first
mortgage lien on the Company's leasehold or fee interest in the property, (y)
providing full coverage against all mechanics' a materialmen's liens, and (z)
containing such endorsements and affirmative coverage as required by the Agent
(to the extent available under applicable law); and (ii) a survey of each
property by a licensed surveyor reasonably satisfactory to the Agent and such
title insurance company, certified to the Agent, the Lenders, the Company, and
the title insurance company, showing no state of facts unsatisfactory to the
Agent; and the Agent shall also have received evidence that the premiums in
respect of such title insurance policies have been paid; and
7. Such other documents and instruments as are provided for under
the Credit Agreement and the other Loan Documents or as the Lenders may deem
reasonably necessary or appropriate.
8. The Company hereby certifies that all representations and
warranties contained in the Credit Agreement are correct in all material
respects with the same effect, before and after giving effect to this Second
Amendment to the Amended and Restated Credit Agreement, as though such
representations and warranties had been made on the date hereof.
III. MISCELLANEOUS.
-------------
1. The Company agrees to pay all costs and expenses incurred by the
Agent and the other Lenders (including, but not limited to, reasonable
attorneys' fees and expenses) in connection with the preparation, performance
and enforcement of this Amendment.
2. The Company hereby confirms that there is currently outstanding an
aggregate of $47,759,850.00 of Advances and Letters of Credit, together with
--------------
accrued and unpaid interest and fees earned thereon, and that all such sums are
due and payable to the Lenders without any offset, defense or counterclaim of
any kind.
-7-
<PAGE>
3. The Company hereby acknowledges that Agent's prior acceptance of
financial statements of the General Partner in lieu of those of the Company does
not waive any of the Company's obligations to provide financial statements under
Section 5.2 of the Credit Agreement.
4. Except as set forth in this Amendment, the Credit Agreement and the
other Loan Documents remain unmodified and in full force and effect. All
understandings and agreements heretofore had between the Agent and the Company
with respect to the transactions contemplated by this Amendment are merged into
this Amendment which alone fully and completely sets forth the agreement with
respect thereto between the Agent and the Company. Nothing contained herein
shall derogate from the obligation of the Company to pay any amounts which have
or may become payable by it under the Credit Agreement and the other Loan
Documents or, except as set forth herein or in the Credit Agreement, from the
obligation of the Lenders to make Advances.
5. This Amendment may be executed in counterparts, each of which will be
deemed an original and all of which together shall constitute one and the same
instrument.
<PAGE>
IN WITNESS WHEREOF, this Amendment has been executed on the date first
set forth above.
NATIONAL WESTMINSTER BANK Plc,
NEW YORK BRANCH
By: ______________________________
Name:
Title:
CREDIT LYONNAIS,
CAYMAN ISLAND BRANCH
By: ______________________________
Name:
Title:
CIBC, INC.
By: __________________________________
Name:
Title:
ALEXANDER HAAGEN PROPERTIES OPERATING
PARTNERSHIP, L.P.
By: Alexander Haagen Properties, Inc.,
General Partner
By: /s/ Alexander Haagen
------------------------------
Name:
Title:
<PAGE>
APPENDIX I
----------
EXHIBIT A
---------
LIST OF LENDERS AND PERCENTAGES
-------------------------------
LENDER COMMITMENT
- ------ ----------
National Westminster Bank Plc,
New York Branch $40,000,000
Credit Lyonnais,
Cayman Island Branch $25,000,000
CIBC, Inc. $25,000,000
-----------
TOTAL COMMITMENT: $90,000,000
<PAGE>
APPENDIX II
Schedule 8
Unencumbered Properties as of the date hereof
---------------------------------------------
Empire Center, Fontana, California
Medford Center, Medford, Oregon
Pomona Gateway, Pomona, California
Sears Hollywood, Hollywood, California
Smitty's Tucson, Tucson, Arizona
Vermont-Slauson Shopping Center, Los Angeles, California
<PAGE>
EXHIBIT 10.33
FIRST AMENDMENT TO THE AMENDED AND RESTATED 1993 STOCK OPTION
AND INCENTIVE PLAN FOR OFFICERS, DIRECTORS AND
KEY EMPLOYEES OF ALEXANDER HAAGEN PROPERTIES, INC.,
AND
HAAGEN PROPERTY MANAGEMENT, INC.
Alexander Haagen Properties, Inc., a Maryland corporation, Alexander Haagen
Properties Operating Partnership, L.P., a California limited partnership, and
Haagen Property Management, Inc., a California corporation, adopted The 1993
Stock Option and Incentive Plan for Officers, Directors and Key Employees of
Alexander Haagen Properties, Inc., Alexander Haagen Properties Operating
Partnership, L.P. and Haagen Property Management, Inc., effective December 10,
1993, for the benefit of their eligible employees and directors. Such plan was
amended on August 14, 1995 and was amended and restated on February 28, 1996
(such amended and restated plan is hereinafter referred to as the "Plan"). The
Plan consists of two plans, one for the benefit of the employees and directors
of Alexander Haagen Properties Operating Partnership, L.P. and the employees and
directors of Haagen Property Management, Inc.
As allowed by Section 9.2 of the Plan, this amendment to the Plan was
authorized by a resolution of the Board of Directors of the Company on November
19, 1996. This First Amendment, together with the Plan, constitutes the entire
Plan as amended to date.
1. The first sentence of Section 8.1 of the Plan is hereby amended to read
as follows:
The Compensation Committee (or another committee of the Board
appointed to administer this Plan) shall consist solely of two or more
directors appointed by and holding office at the pleasure of the Board,
each of whom is both a "non-employee director" as defined by Rule 16b-3
and an "outside director" for purposes of Section 162(m) of the Code.
2. Section 5.3(d) of the Plan is hereby amended to add the phrase "if
applicable", immediately following the phrase "subject to the timing
requirements of Section 5.8,".
1
<PAGE>
3. Section 5.4 of the Plan is hereby amended to read in its entirety as
follows:
5.4 Transfer of Shares to a Company Employee or Independent Director.
----------------------------------------------------------------
As soon as practicable after receipt by the Company, pursuant to
Section 5.3(d), of payment for the shares with respect to which an
Option (which in the case of a Company Employee was issued to and is
held by such Company Employee was issued to and is held by such Company
Employee in his or her capacity as a Company Employee), or portion
thereof, is exercised by and Optionee who is a Company Employee or
Independent Director, with respect to each such exercise, the Company
shall transfer to the Optionee the number of shares equal to
(a) the amount of the payment made by the Optionee to the Company
pursuant to Section 5.3(d), divided by
------- --
(b) the price per share of the shares subject to the Option as
determined pursuant to Section 4.2.
4. Section 5.5 of the Plan is hereby amended to read in its entirety as
follows:
5.5 Transfer of shares to an HPMI Employee or HPMI Director. As soon
-------------------------------------------------------
as practicable after receipt by the Company, pursuant to Section
5.3(d), of payment for the shares with respect to which an Option
(which was issued to and is held by an HPMI Employee or HPMI Director
in his or her capacity as an HPMI Employee or HPMI Director), or
portion thereof, is exercised by an Optionee who is an HPMI Employee or
HPMI Director, with respect to each such exercise.
(a) the Company shall transfer to the Optionee the number of shares
equal to (A) the amount of the payment made by the Optionee to the
Company pursuant to Section 5.3(d) divided by (B) the Fair Market Value
of a share of Common Stock at the time of exercise (the "HPMI Optionee
Purchased Shares); and
2
<PAGE>
(b) the Company shall sell to the Operating Partnership the number of shares
(the "HPMI Partnership Purchased Shares") equal to the excess of (A) the
amount obtained by dividing (i) the amount of the payment made by the
Optionee to the Company pursuant to Section 5.3(d) by (ii) the price per
share of the shares subject to the Option as determined pursuant to Section
4.2., over (B) the HPMI Optionee Purchased Shares;
The price to be paid by the Operating Partnership to the Company for the HPMI
Partnership Purchased Shares (the "HPMI Partnership Purchase Price") shall be
an amount equal to the product of (A) the number of HPMI Partnership
Purchased Shares multiplied by (B) the Fair Market Value of a share of Common
-------------
Stock at the time of the exercise;
(c) As soon as practicable after receipt of the HPMI Partnership Purchased
Shares by the Operating Partnership, the Operating Partnership shall transfer
such shares to HPMI.
(d) As soon as practicable after receipt of the HPMI Partnership Purchased
Shares by HPMI, HPMI shall transfer such shares to the Optionee at no
additional cost, as additional compensation.
(e) The value of any Options, Restricted Stock and other benefits provided by
the Operating Partnership to HPMI under this Plan are deemed to constitute an
additional management fee to HPMI from the Operating Partnership under the
Property Management Agreement equal to the value of such Options, Restricted
Stock and other benefits.
5. Section 5.6 of the Plan is hereby amended to read in its entirety as follows:
5.6 Transfer of Shares to an Operating Partnership Employee. As soon as
------------------------------------------------------
practicable after receipt by the Company, pursuant to Section 5.3(d), of
payment for the shares with respect to which an Option (which was issued to
and is held by a Partnership Employee in his or her capacity as a Partnership
Employee), or portion thereof, is exercised by an Optionee who is an
Operating Partnership Employee, with respect to each such exercise.
<PAGE>
(a) the Company shall transfer to the Optionee the number of shares equal to
(A) the amount of the payment made by the Optionee to the Company pursuant
to Section 5.3(d) divided by (B) the Fair Market Value of a share of Common
----------
Stock at the time of exercise (the "Partnership Optionee Purchased Shares");
and
(b) the Company shall sell to the Operating Partnership the number of shares
(the "Partnership Purchased Shares") equal to the excess of (A) the amount
obtained by dividing (i) the amount of the payment made by the Optionee to
the Company pursuant to Section 5.3(d) by (ii) the price per share of the
shares subject to the Option as determined pursuant to Section 4.2, over (B)
the Partnership Optionee Purchased Shares;
The price to be paid by the Operating Partnership to the Company for the
Partnership Purchased Shares (the "Partnership Purchased Price") shall be an
amount equal to the product of (A) the number of Partnership Purchased
Shares multiplied by (B) the Fair Market Value of a share of Common Stock at
---------- --
the time of the Exercise;
(c) As soon as practicable after receipt of the Operating Partnership
Purchased Shares by the Operating Partnership, the Operating Partnership
shall transfer such shares to the Optionee at no additional cost, as
additional compensation.
6. Section 5.7 of the Plan is hereby amended in its entirety to read as
follows:
5.7 Transfer of Payment to the Operating Partnership. As soon as
------------------------------------------------
practicable after receipt by the Company (i) of the amount described in
Section 5.5 and (ii) the Partnership Purchase Price described in Section
5.4, the Company may contribute to the Operating Partnership an amount
of cash equal to such payment and the Operating Partnership shall issue
an additional General Partner Interest to the Company on the terms set
forth in the Partnership Agreement.
7. Section 5.8 is hereby amended to add the phrase "With respect to Options
granted prior to November 19, 1996," to the beginning of such section and to
revise the word "At" at the beginning of such section to read "at".
<PAGE>
8. Section 5.12(c) is hereby amended to add the phrase "or sale" after the
word "transfer," to revise the reference to "Section 5.6(a)(ii) to refer
instead to "Section 5.5" and to revise the reference to "Section 5.6(a)(ii)" to
refer instead to "Section 5.6".
9. Section 9.5 of the Plan is hereby amended to add the phrase "if
applicable," immediately following the phrase "Subject to the timing
requirements of Section 5.8,".
Executed at Manhattan Beach, California, this 19th day of November, 1996.
---- --------
By: /s/ Alexander Haagen
-----------------------
President
By: /s/ Steven Jaffe
-----------------------
Secretary
<PAGE>
EXHIBIT 10.34
SECOND AMENDMENT TO AGREEMENT OF LIMITED PARTNERSHIP
This Second Amendment to Agreement of Limited Partnership (this
"Amendment") dated as of March ___, 1995 amends that certain Agreement of
Limited Partnership of Alexander Haagen Properties Operating Partnership, L.P.,
a California limited partnership, dated December 27, 1994 and amended as of
January 1, 1994, by and among Alexander Haagen Properties, Inc., a Maryland
corporation (the "General Partner"), and the Limited Partners (the "Partnership
Agreement"). Unless otherwise provided herein, all capitalized terms used
herein shall have the meanings given to them in the Partnership Agreement.
RECITALS
--------
WHEREAS, the Partnership has determined that it is in its best interests
to invest in and form that certain California limited partnership to be known as
Alexander Haagen Properties Finance Partnership, L.P. (the "Finance
Partnership"), the general partner of which is Alexander Haagen Properties
Finance, Inc. ("Finance Company") the sole shareholder of which is the General
Partner; and
WHEREAS, the Partnership has approved the General Partner's investment in
Finance Company.
AGREEMENT
---------
1. The Partners agree as follows:
Section 7.5.A of the Partnership Agreement is amended to add the following
to the end of the second sentence thereof:
; provided, however, that the General Partner may organize
and own the stock of Alexander Haagen Properties Finance,
Inc., a Delaware corporation (and any successor entity
thereto), and do any and all such things as may be
necessary and appropriate in connection with the formation
of the Finance Partnership, including the contribution
of an approximately 7.275% undivided interest in the La
Verne Towne Center and a demand note for the amount of
$10,185,000 to the capital of the Finance Company.
1
<PAGE>
II. Except as set forth in this Amendment, all terms and conditions of the
Partnership Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the Partners have caused this Amendment to be executed
effective as of the day and year first above written.
ALEXANDER HAAGEN PROPERTIES, INC.
a Maryland Corporation
General Partner
By: /s/ Alexander Haagen
-----------------------------
Name:
Title:
<PAGE>
EXHIBIT 10.35
THIRD AMENDMENT TO AGREEMENT OF
LIMITED PARTNERSHIP OF ALEXANDER HAAGEN
The Agreement of Limited Partnership of Alexander Haagen Properties
Operating Partnership, L.P., dated as of December 27, 1993, is hereby amended as
of this 27th day of February, 1997, as follows:
1. Article I is hereby amended to insert the following definition in the
appropriate alphabetical order:
"'Consent of the Partners' means the Consent of Partners holding
Percentage Interests that in the Aggregate are equal to or greater than
60% of the aggregate Percentage Interests of all Partners, which Consent
shall be obtained prior to the taking of any action for which it is
required by this Agreement and may be given or withheld by such Partners,
in their sole and absolute discretion."
2. Section 11.2 is hereby amended by inserting "A," at the beginning of
the existing paragraph and inserting after such paragraph the following:
"B. In addition to, and not in lieu of, the restrictions set forth
elsewhere in this Agreement, including without limitation in Section 11.2A
and Section 7.2E hereof, the General Partner shall not engage in any
merger, consolidation or other combination with or into another person,
sale of all or substantially all of its assets or any reclassification,
recapitalization or change of its outstanding equity interests (each, a
"Termination Transaction"), unless (i) the Termination Transaction has been
approved by a Consent of the Partners and, unless (ii) except as otherwise
provided in Section 11.2C, in connection with which all Limited Partners
either will receive, or will have the right to elect to receive, for each
Partnership Unit an amount of cash, securities, or other property equal to
the product of the REIT Shares Amount and the greatest amount of cash,
securities or other property paid to a holder of one REIT Share in
consideration of one REIT Share pursuant to the terms of the Termination
Transaction; provided that if, in connection with the Termination
-------- ----
Transaction, a purchase, tender or exchange offer shall have been made to
and accepted by the holders of the outstanding REIT Shares, each Limited
Partner shall receive, or shall have the right to elect to receive, the
greatest amount of cash, securities, or other property which such holder
would have received had it exercised its right to Redemption (as set forth
in Section 8.6) and received REIT Shares in exchange for its Partnership
Units immediately prior to the expiration of such purchase, tender or
exchange offer and had thereupon accepted such purchase, tender or exchange
offer and then such Termination Transaction shall have been consummated.
C. In addition to, and not in lieu of, the restrictions set forth elsewhere
in this Agreement, including without limitation in Section 11.2A and
Section 7.2E hereof, the General Partner may merge, or otherwise combine
its assets, with another entity without satisfying the requirements of
Section 11.2B(ii) hereof if: (i) immediately after such merger or other
combination, substantially all of the assets directly or indirectly owned
by the surviving entity, other than Partnership Units held, by such General
Partner, are owned directly or indirectly by the Partnership or another
limited partnership or limited liability company which is the survivor of a
merger, consolidation or combination of assets with the Partnership (in
each case, the "Surviving Partnership"); (ii) the Limited Partners own a
percentage interest of the Surviving Partnership based on the relative fair
market value of the net assets of the Partnership (as determined pursuant
to Section
1
<PAGE>
11.2.E) and the other net assets of the Surviving Partnership (as
determined pursuant to Section 11.2.E) immediately prior to the
consummation of such transaction; (iii) the rights, preferences and
privileges of the Limited Partners in the Surviving Partnership are at
least as favorable as those in effect immediately prior to the
consummation of such transaction and as those applicable to any other
limited partners or non-managing members of the Surviving Partnership;
and (iv) such rights of the Limited Partners include the right to
exchange their interests in the Surviving Partnership for at last one
of: (a) the consideration available to such Limited Partners pursuant to
Section 11.2.B or (b) if the ultimate controlling person of the
Surviving Partnership has publicly traded common equity securities, such
common equity securities, with an exchange ratio based on the relative
fair market value of such securities (as determined pursuant to Section
11.2.E) and the REIT Shares.
D. In connection with any transaction described in Section 11.2.B or
Section 11.2.C, hereof, the General Partner shall use its commercially
reasonable efforts to structure such Termination Transaction to avoid
causing the Limited Partners to recognize gain for federal income tax
purposes by virtue of the occurrence of or their participation in such
Termination Transaction.
E. In connection with any transaction described in Section 11.2.B or
11.2.C, the relative fair market values shall be reasonably determined
by the General Partner as of the time of such transaction and, to the
extent applicable, shall be no less favorable to the Limited Partners
than the relative values reflected in their terms of such transaction."
3. Section 7.3.E. is hereby amended by adding to the end thereof a new
clause (4) as follows:
"(4) Prior to February 27, 2002, sell or otherwise dispose of any of
the properties known as Covina Town Square, El Camino North/Fire
Mountain, Fountain Valley, Date Palm and City Center-San Francisco."
IN WITNESS WHEREOF, the Partners have caused this Amendment to be
executed effective as of the day and year first above written.
Alexander Haagen Properties, Inc.,
a Maryland corporation
General Partner
By: /s/ Alexander Haagen
-----------------------------------
Name: Alexander Haagen, Sr.
---------------------------------
Title: Chairman of the Board, Chief
--------------------------------
Executive Officer and President
--------------------------------
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement No,
33-07673 of Alexander Haagen Properties, Inc. on Form S-3 and Registration
Statement No. 33-73306 of Alexander Haagen Properties, Inc. on Form S-8 of our
report dated February 28, 1997, appearing in this Annual Report on Form 10-K of
Alexander Haagen Properties, Inc. for the year ended December 31, 1996.
DELOITTE & TOUCHE, LLP
Los Angeles, California
February 28, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-START> JAN-01-1996 JAN-01-1995
<PERIOD-END> DEC-31-1996 DEC-31-1995
<CASH> 5,941 3,687
<SECURITIES> 0 0
<RECEIVABLES> 5,987 11,616
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 0 0
<PP&E> 659,565 653,058
<DEPRECIATION> 104,330 90,478
<TOTAL-ASSETS> 594,876 605,777
<CURRENT-LIABILITIES> 0 0
<BONDS> 411,240 392,123
0 0
0 0
<COMMON> 120 120
<OTHER-SE> 116,506 167,331
<TOTAL-LIABILITY-AND-EQUITY> 594,876 605,777
<SALES> 0 0
<TOTAL-REVENUES> 90,125 81,323
<CGS> 0 0
<TOTAL-COSTS> 25,633 26,059
<OTHER-EXPENSES> 21,937<F1> 25,368
<LOSS-PROVISION> 9,044<F2> 0
<INTEREST-EXPENSE> 35,516 32,304
<INCOME-PRETAX> (2,005) (2,408)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (2,005) (2,408)
<EPS-PRIMARY> (0.17) (0.20)
<EPS-DILUTED> 0 0
<FN>
<F1>INCLUDES DEPRECIATION AND AMORTIZATION OF $17,118 AND $20,018 FOR THE YEARS
ENDED DECEMBER 31, 1996 AND 1995, RESPECTIVELY, AND $(245) AND $(20) ALLOCATED
TO MINORITY INTERESTS, RESPECTIVELY.
<F2>NON-RECURRING CHARGES OF; $6,900 TO RESERVE AGAINST STRAIGHT-LINE RENTS
RECEIVABLE, AND $2,144 FOR BUILDING DEMOLITION FOR THE YEAR ENDED DECEMBER 31,
1996.
</FN>
</TABLE>
